A key venue for the 2014 Glasgow Commonwealth Games faces a funding shortfall after the credit crunch scuppered plans to raise the cash through a land sale.

The 12,500-seater Scottish National Arena at the Scottish Exhibition and Conference Centre (SECC), designed by Foster & Partners, will host gymnastics and netball in 2014.

Scottish Enterprise has committed £25m to the £70m project but the SECC planned to use receipts from the sale of land on its site as part of its funding for the arena.

But developer Elphinstone, which prepared the master plan for a £350m “sustainable village” of 3,000 houses on a 64-acre site at the western end of the SECC, says it cannot now realise the full value because of the credit crunch and has pulled a sale to third parties.

It had hoped to receive planning consent for the project by 2005 but final approval was only given in May this year when the credit crunch hit the housing market hardest.

The SECC claims it has no worries about finding the funds from an alternative route but has not released details on how it would achieve that .

It may now develop the land in stages but it is understood that discussions have also taken place with Glasgow city council about short-term funding.

Sources close to the council said it may agree to act as guarantor if the SECC finds it difficult to borrow the money in the short term although nothing formal has been agreed.

Glasgow and the Scottish government have underwritten the cost of all the venues in the 2014 Commonwealth Games.

“Final planning approval was only awarded in May and came at the worst time of the credit crunch for housebuilders,” said Pete Selman, divisional director at Elphinstone.

“There are plenty of people interested in a distress sale but we have had to tell the SECC that we cannot sell the site at its full value in the current climate.

“We still have a huge interest in what would have been an iconic site and hope it can be re-invigorated later.”

Development at the eastern end by Macdonald estates which includes a hotel, office building and multi-storey car park, is already under way.

A spokeswoman for the SECC denied there was any shortfall in funds for the project. “Developing the units in stages may be a better option,” she said.

“There is no shortfall or funding crisis and we think that the state of the market is actually improving.”

The arena is the first major development to be undertaken in the SECC’s master plan, which claims it has the potential to inject £50m per annum into the local economy and create 1,500 jobs.

Scottish Enterprise said it was unaware of any issues but did not expect to increase its funding to the project.

Meanwhile, the owner of the O2 arena, may be about to lend its commercial nous to SECC to help bring in big-name sponsors for the new arena.

American-owned AEG, which transformed the Millennium Dome into the world’s most popular music venue, is hunting for more investment opportunities in Europe. Next month it will open a second O2-branded arena, in Berlin.

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