A loan of £47.5 million, which is one of the largest long-term loans provided to an affordable housing fund by the Scottish Government, will be given to PfP Capital, which is part of the regeneration group Places for People (PfP). The fund will be used to build mid-market rent homes across the country.

Making the announcement during a visit to a housing development in Edinburgh, Mr Stewart said: “This investment will support people on low and modest incomes to access high quality rented accommodation at affordable rates and is one of the many ways in which we are delivering on our target of 50,000 affordable homes by 2021, backed by over £3 billion.

“Affordable housing is about more than just bricks and mortar. We want everyone to have a safe, warm home and schemes like this will help to create a fairer Scotland, while delivering great economic benefits.”

Chris Jones, managing director of Places for People’s asset management business, PfP Capital, said: “This investment will allow us to operate a strategy delivering a significant number of affordable homes to people across Scotland and we are delighted to work with the Scottish Government on this exciting initiative.

“This fund will also provide a great opportunity for institutional investors to provide funding for the next generation of Scotland’s affordable homes which Places for People will look to deliver in the coming years.”

Castle Rock Edinvar managing director, Richard Jennings, added: “This fund demonstrates the importance of financial innovation in delivering affordable homes and Castle Rock Edinvar is delighted to be an early investor. We are looking forward to working with Places for People Group colleagues at PfP Capital and making it a success.”

PfP Capital will establish a fund which will deliver and operate the 1000 mid-market rent homes. Investors in the fund are anticipated to benefit from index-linked returns derived from the rental income.

PfP will be working to raise at least £87.5m of additional capital from third parties into the fund over the coming months, through the launch of a new investment fund.

A Scottish Limited Partnership has been established with a number of safeguards in place to ensure transparency on the operation of the Mid Market Rent (MMR) Fund.