Reduced Robin Hood Gardens plan needs £13million

Units on offer at its replacement, the mixed-use Blackwall Reach project, will also be cut to 1,600 from the 3,000 discussed last year. There are currently 252 homes on the total site.

The Government's decision not to list the 1970s brutalist estate last month looked to have cleared the way for Tower Hamlets Council and the Homes and Communities Agency to develop the area, despite protests from leading architects.

They still hope to begin work late next year, with completion earmarked for early 2018. But officers have warned the drop in demand for private homes and usable land on-site will result in "significantly less" housing than originally imagined.

Corporate director of development and renewal Aman Dalvi said the cost of re-purchasing homes on site will cost £12million, plus a further £1million for the medical centre in Woolmore Street.

While the council only has £5.574million in available capital receipts, it hopes to generate the rest of the cash through "contracted payments" from asset sales.

He said: "The council is now at a point where there are insufficient capital resources to proceed with further purchases."

Chief financial officer Chris Naylor added that "there is relatively little risk that [the payments] will not be received, but there is a small residual risk".

He said: "It is hoped that a partial recovery in the housing market will mean that not all the funding is required for this purpose, and at that stage can be made available to other priorities."

The scheme will also feature a health centre and community space, but the proposed expansion of Woolmore School could be affected by the reduction in the number of homes.

Ballymore's interest in the project ended on March 31 this year, when the HCA bought its land for £10million. This leaves the council on the hunt for a development partner this summer, with construction a little over a year away.

The Ballymore site also includes some areas that need to be acquired, such as "a 42-year lease on a works yard; a squatted flat in a building adjacent to the Local Labour in Construction building and two small freehold interests in Naval Row".

Mr Naylor admitted officers were looking for ways to fund the buy-backs with "very limited resources", but argued against delaying the process until a new source of funding was found.

He said: "Whilst a delay may improve the viability of the business plan as the market for house sales begins to improve, it could also impact on the valuation and purchase process.

"It is also likely to present difficulties for HCA in progressing the underwriting of the procurement process."

While a minimum of 35 per cent of the accommodation by habitable room will be affordable, no council homes will be built on site, and current residents will be asked either to transfer to a housing association on-site or apply for a council house elsewhere in the borough.

General consultation will take place this summer, with an event planned next January before an outline scheme is submitted.