Lend Lease is drawing up plans for a £1.5bn residential investment fund based on the athletes’ village which the Australian property and construction group is building for the 2012 Olympics in London.

The fund – or Olympic Bond as Lend Lease calls it – would be the largest of its kind in Britain and is likely to be floated on the London stock market as a real estate investment trust (REIT), the new breed of tax-efficient vehicle that came into force this year.

Nigel Hugill, the UK chief executive of Lend Lease said the planned launch date is 2009 but it could go earlier because of the current institutional interest in real estate and the dearth of large-scale residential funds.

The plans come to light just months after a Lend Lease-led consortium was selected to build the 4.5m sq ft athletes village in the privately developed Stratford City complex next to the Olympic Park in east London.

During the Games, over 17,000 athletes and officials will stay in the village’s 4,000 flats before the properties are converted into permanent housing. The initial aim of the fund would be to defray the village’s estimated £2bn construction cost, which falls outside the official Olympic budget.

Mr Hugill said: “The majority or perhaps the entirety of the Olympic Village will form the basis of a major residential investment fund, the like of which we’re never seen before. But equally well people haven’t been in a position to put in the level of critical mass that we can.”

He adds: “We would set out to create the largest UK listed residential vehicle. The fund would be a UK REIT but supported by a range of international investors, including Lend Lease.”

Lend Lease and its partners – affordable housing specialist First Base and housing association East Thames Group – were selected for the village in March by the Olympic Delivery Authority and the Stratford City developers London & Continental Railways and property group Westfield. The Lend Lease consortium beat off competition from a partnership of Barratt Homes and Bouygues.

Stratford City already has planning permission but next week Lend Lease will launch its own international competition to select a panel of up to 40 architects to design individual buildings in the village. “This underpins our commitment to quality and to design,” said Mr Hugill.

Construction is due to start on the village next summer but Lend Lease is committed to building another 4.5m sq ft after the Games, including more housing, offices and hotels. Mr Hugill said “the positive Games afterglow” and continued investment in infrastructure will add to the residential fund’s attraction to investors.

Some of the permanent housing created from the village is likely to be subject to conventional sales in the open market. But the intention is to have a mixed community with a lot of private rented stock, which will be owned by the fund. Mr Hugill suggested that a separate investment vehicle could be created and run by First Base and East Thames for affordable housing.