China National Building Materials Group Corp struck a 2.75-billion-pound ($3.41 billion) joint venture deal on Monday to open six highly cost-efficient pre-fabricated house-building factories in the United Kingdom, capable of producing 25,000 homes a year.

The new homes built by the joint venture will reduce construction costs to a target of 400 pounds per square meter, significantly less than the 1,000 pounds per sq m average in the UK market. It came at an opportune time when the UK government is making policy plans to increase affordable homes.

CNBM partners with the UK's housing association Your Housing Group and renewable energy specialist Welink to construct the factories for modular units. CNBM will provide 2.5 billion pounds in funding, and 250 million pounds from YHG.

Shou Peng, chairman of CNBM, said: "The key to unlocking the opportunities to address the housing needs of the UK is through the development and delivery of an industrialization strategy at significant scale."

The CNBM deal was welcomed by the UK's International Trade Minister Greg Hands, who hailed it as an endorsement to the UK's attractiveness to foreign investors.

He said: "This deal has the potential to benefit local communities across the country, creating jobs, boosting local economies and creating homes."

Stephen Haigh, chief executive of YHG and UK chief executive of the new joint venture, said the new project will help the UK government achieve its housing aspirations.

The deal comes at a time when modular construction is the new buzzword in the construction industry. This technique produces standard room units inside factories which can readily be assembled on construction sites, to save construction time and costs.

China has led the field in modular construction techniques by leveraging on its domestic housing market scale, and some Chinese firms have already expanded into the UK's modular construction market, one example being the Shenzhen-based CIMC Modular Building Systems, having done more than 10 UK projects for clients including InterContinental Hotels Group and Hilton.

The CNBM consortium partners are looking for factory sites across England. The first factory, in Liverpool, is expected to receive planning permission in January. A research and technology center is being built in Gloucester by YHG to pioneer new development.

The project will deliver 2,000 homes next year, ramping up production after that to 25,000 homes annually by 2022. The entire project is expected to create 1,000 new jobs.

The modular units to be made are based on designs by the Spanish firm Barcelona Housing Systems, notable for their energy efficiency and affordability.

The UK government said it plans to create a 2.3-billion-pound Housing Infrastructure Fund, to deliver infrastructure for up to 100,000 new homes in high-demand areas.

Haigh added his team will work with local authorities, offering the consortium's development model as solution to their house building and development needs.