Olympic village funding faces £200m cut

The Olympic Delivery Authority is locked in negotiations with Australian builder Lend Lease over financing of the project to build 3,300 homes in Stratford's Olympic Park.

It is thought the scarcity of credit in finance markets has prompted Lend Lease to try to downgrade its contribution to the £800 million public-private scheme from £600 million to £400 million.

Negotiations are expected to continue for months and the ODA will have to fund the difference if the builder refuses to back down. Just four months ago the ODA set aside £492 million to fund the village and the media centre but that budget looks certain to be insufficient, making a raid on the £2.7billion contingency inevitable.

The village, part of the £4billion Stratford City retail complex adjoining the Olympic Park, will provide accommodation for 16,000 athletes at the Games. Lend Lease aims to profit by sale or lease of the flats after the Games and it has been claimed that it is pressuring the ODA to guarantee such returns in an unsettled property market.

The ODA has insisted it will not exceed its £9.3billion budget and is thought to be trying to trim the 2012 construction bill in other areas such as ordering steel earlier than necessary as a hedge against inflation. The ODA said the £496million Olympic stadium remains within budget after a report that its cost may rise by 10 per cent to fulfil pledges on state-of-the-art design and sustainability for the 80,000-capacity venue.

An ODA spokesman said: "The Olympic Village site is now cleared. Planning applications for the first blocks have been submitted and Lend Lease will start piling this month. We expect to sign interim agreements shortly. We will then need to have all the financial arrangements in place before the main build later this year.

"The deteriorating market obviously presents a challenge but we remain on programme."

Boris Johnson will make a 15-minute presentation on legacy to the International Olympic Committee in his first 2012-related task as Mayor. He will out-line to the IOC's inspection team visiting London in two weeks the vision for the Olympic Park after the Games.

The interim findings of the "legacy masterplan framework" have been devised by the London Development Agency. Conservative sources say the new Mayor will want to make adjustments to the LDA's 2012 vision before it is presented to IOC members.

The Games legacy in east London is expected to be the single most important area of influence for Mr Johnson, who will seek talks with the LDA's Tom Russell, a regeneration guru hired for his work on the 2002 Manchester Commonwealth Games.

Mr Johnson's first public appearance on Olympic duty will be at a press conference at the end of the three-day visit alongside 2012 chiefs and the IOC's chief inspector Denis Oswald.

He will then have three months before Beijing to familiarise himself with London's obligations to provide security, policing and transport.