DUBLIN, Dec 7 (Reuters) - Ireland's Cairn Homes and U.S. fund Lone Star struck a deal on Monday to buy 20 percent of the land available for residential development in Dublin, amid a severe shortage of housing in Europe's fastest growing economy.
Cairn, which in June became the first Irish housebuilder to float since a 2008 property market crash, will take a 75 percent share in the portfolio of land.
The pair bought the land from Royal Bank of Scotland's Ulster Bank for 360 million pounds ($542 million).
That represented a 78 percent discount to the par value of 1.63 billion pounds for RBS and is the last portfolio to be sold from its "bad bank" of Irish assets after it lost billion of pounds in the property meltdown.
Cairn said its share in the 1,700 acres of development land, which also contains some sites outside Dublin, would allow it to build over 14,000 new homes over the coming years, with an expected net development value in excess of 2 billion euros.
While Ireland was left with a surplus of houses after the 2008 property crash that cut values in half, the wrong stock was built in the wrong places, leaving property scarce in cities such as Dublin while out-of-town housing estates lie empty.
Since then, Ireland has failed to build even half the 25,000 homes a year analysts say are needed to keep up with demand among a population that is also the fastest growing in the EU.
"This is a very good deal for Cairn and its partner on the deal, Lone Star, is also very familiar with Irish property assets, having been involved in deals totalling many billions of euro here in recent years," said John Cronin, analyst at Investec Ireland.
Cairn shares were 1.5 percent higher at 1.17 euros at 0920 GMT.
($1 = 0.6636 pounds) (Reporting by Padraic Halpin and Steve Slater in London; Editing by Mark Potter)