The firm was named preferred bidder for the scheme in 2017 by Wandsworth Council.
Redrow submitted plans last summer for 1,103 new homes as part of a 10-year regeneration project. And work started on the first phase of ten new council houses in February.
But the house builder has now confirmed it will be pulling out following recent plans to scale back its business in London.
Paul Muldowney, Managing Director at Redrow’s Greater London region, said: “Following a review of our schemes in London and the wider market, we recently announced we will scale back operations in London.
“As part of this we have taken the difficult decision to step away from the redevelopment of the Alton Estate and approached the council to request a managed exit.
“New home delivery in London is a challenge compounded by increasing costs and a two-tier planning system.
“Our designs for the new community at the Alton Estate have been prepared to provide new homes alongside a wide range of community facilities and commercial space for local residents which have helped to move the scheme forward.
“We would like to reassure the local community that the homes at Bessborough Road, where we are currently on site, will be completed by Redrow.
“Taking the regeneration project to this stage has been the result of hard work and close collaboration with Wandsworth Council, we will continue to work closely together to ensure a smooth transition.”
Cllr Ravi Govindia, Leader of Wandsworth Council said: “It is deeply disappointing that Redrow feels unable to progress with this transformative scheme and, as a result, the council has taken the difficult but pragmatic decision that it is better to look at alternative options rather than try and proceed with an unwilling partner.
“Despite these unprecedented times, the council remains completely committed to delivering the transformational regeneration the residents of the Alton Estate expect and deserve.
“We will be exploring options as to how to deliver the scheme without Redrow and to maintain momentum subject to planning permission being granted.
“I know residents on the Alton are looking forward to better opportunities in the area and we are determined to work harder than ever to meet these expectations.
“Our commitment to improving the lives of our residents remains unchanged and I hope critics of the scheme can now get behind our efforts to transform the estate and do what is best for residents.”