Irish property group Cairn Homes, along with US private equity group Lone Star, is to acquire Project Clear, a portfolio of Ulster Bank loans, for €503 million.

The loans are backed by nearly 1,700 acres of prime residential land in Dublin that could accommodate up to 20,000 houses .

The transaction, due to be completed by the end of the year, represents a 78 per cent discount on the original book value of the loans.

Cairn said it will pay €378 million for a 75 per cent share of the portfolio, which includes loans with a par value of around €2 billion.

Cairn’s share of the portfolio will provide it with the opportunity to build over 14,000 new homes, with an expected net development value of over €2 billion, the company said.

Chief executive Michael Stanley said: " This transaction will unlock the most significant land bank available in Ireland. "

Ulster Bank's parent Royal Bank of Scotland injected £15.3 billion (€21.3 billion) into Ulster Bank between 2008 and 2013 and moved billions of euros of risky property assets from the unit's balance sheet into a company bad bank.