The loan will help to build up to 13 modern and energy-efficient homes in rural areas, which supports the council’s strategic objectives to encourage people to live and work in Shetland.

The move is considered a pilot project since the council has not provided loans to local businesses for housebuilding before.

Brian Anderson, owner of BA Builders, said that the company has changed its business model to prioritise new builds, rather than concentrating mostly on smaller scale projects, such as extensions and renovations.

He added: “Accessing funding for property development has not been easy and without council funding, we couldn’t have gone ahead with this project. We started the build on the first house in Burra in February and already have interest from prospective buyers for this house and future builds. I’d encourage folk to get in touch at an early stage if they are interested.”

Alastair Cooper, chair of the council’s development committee, said: “Housing is a key part of the 10 year plan to ensure that people can live, work, study and invest in Shetland. This is a positive project to provide highly energy-efficient and affordable family houses which are very much in demand.

“Historically, the construction industry has not been a sector supported by the council, however BA Builders approached the council having exhausted all other funding sources. Demand for future house building loans will be monitored and we may review our policy so that we can support other housing developments in this way.”

The council maintains a £15m Shetland Investment Fund and can provide commercial finance to new and growing local businesses to stimulate economic growth and employment. This fund aims to ensure that good, commercially viable proposals do not fail from a lack of access to finance.