Credit crunch hits Olympic Village financing

A computer-generated image released by the London 2012 committee shows an aerial view of London's Olympic Park by night.

LONDON (Reuters) - The one billion pound Olympic Village for the London 2012 Games will require greater public financing than previously expected because of the global credit crunch, organisers said on Friday.

The village -- to house athletes and officials -- is the single largest project of the Olympics development in the east of the capital, and was intended to be largely financed by the private sector.

Returns on the scheme would be realised when the village's 3,500 homes are sold after the end of the Olympic and Paralympic Games in September 2012.

But recent turmoil in financial and property markets have hit the ability of developers to raise loans and have forced organisers to consider drawing on contingency funding in the Olympics budget.

"Given the challenging economic environment, we are in ongoing discussions about the level of public investment in the Olympic Village," said John Armitt, chairman of the Olympic Delivery Authority (ODA).

"It is possible, given the economic situation, that more public investment may be needed," an ODA spokesman confirmed.

The spokesman said the extra money would be within the existing 9.3 billion pound budget for the Games and would be offset by the ODA claiming a greater share of profits from future house sales.

Australian property group Lend Lease, the selected developer for the village, confirmed on Friday there had been delays in securing financing, but said it expected a deal to be in place by the end of the year.

"Given current market conditions, it has taken longer than envisaged to secure project debt," it said.

The ODA had hoped to strike a deal with Lend Lease last December.

The Guardian reported that the ODA had originally proposed contributing 550 million pounds of public money for the village, with the remaining 450 million pounds coming from Lend Lease and other financing.

The ODA spokesman would not confirm the figures.

A report from the National Audit Office on Friday said preparations for the games were well underway but faced "formidable" challenges.

"Uncertainties over the deal for the village, legacy requirements and policing and security may add cost or compromise the preparations for a successful Games," said the public spending watchdog's head, Tim Burr.

(Editing by Peter Griffiths)