Dunloe Ewart will reduce and revise a proposed £150 million sterling (€244 million) development in Belfast and withdraw objections to another rival project to win the blessing of city planners in the North.

The property group has abandoned its original plans for the Cathedral Quarter despite having spent £15 million acquiring sites in the area, which is earmarked for major redevelopment by Laganside Development Corporation.

Mr Nigel Kinniard, head of Dunloe Ewart in Northern Ireland, said the company intended to lodge a new planning application.

"We will be submitting an amended planning application for the site which reduces the floor space available for retail from 275,000 sq ft to 200,000 sq ft as well as taking out the proposed hotel and museum elements of our original scheme," he said.

Dunloe Ewart first mooted its Cathedral Quarter plans four years ago, but Dutch group, Multi-Development Corporation (MDC) won the backing of the forerunner to the Department for Social Development with its rival plan.

Dunloe then mounted a series of unsuccessful legal challenges against what it has described as "civil servant obstacles" to its scheme. But yesterday, the Department said it had reached an "understanding" with Dunloe Ewart on how its proposals could co-exist with MDC's proposed £200 million Victoria Square scheme.

A public inquiry into the MDC scheme and the vesting order required for Victoria Square begins today in Belfast. A Department spokesman said it was now content that Dunloe Ewart's new proposals would co-exist with that project. "The Victoria Square project is on a much larger scale and aims to deliver 500,000 sq ft of space. It will act as an impetus to revitalise and enlarge the city centre, and ensure Belfast can compete on a strong basis with its UK and European rivals."

Although Dunloe Ewart and the Department of Social Development appear to have a new working relationship, there is no guarantee the Cathedral Quarter site will receive planning permission. The Department said yesterday that "significant design work" was still required to bring the scheme to fruition.

"Department for Social Development support for the principles does not and at this stage, of course, cannot automatically imply full support for the design of the final scheme which will need to be achieved in close liaison between Dunloe Ewart and Laganside Corporation," a spokesman said.