Sources in the property business say they are adopting a wait-and-see approach to the Government's new affordable housing scheme, billed as a chance for modest income-earners to climb aboard the first rung of the property ladder.

The scheme is excellent in theory, say the critics, but many are sceptical about whether in the current housing climate even the most committed housing minister can carry it off.

On paper, they say, it appears workable enough. Under the scheme, local authority land will be made available to build private houses for people earning less than £20,000. Private builders will be invited to tender for the contract and when completed the homes will then be purchased at cost price with owners availing of a special low interest loan initiative, currently 4 per cent variable or fixed for five years at 4.4 per cent. The scheme also includes subsidies for those earning less than £16,000 in order to further reduce mortgage repayments.

Announcing their plans this week, Noel Dempsey, Minister for the Environment and Local Government, and Bobby Molloy, Minister for Housing and Urban Renewal, said that its purpose was to "help address the affordability gap which house-price increases over the last few years have created for aspiring home-purchasers with modest incomes".

An admirable goal but "it's hardly an earth-shattering initiative," said Gerry Leahy, director of Leahy Property Consultants in response to the plan, which he dismissed as "solution by soundbite".

"In fact, a colleague put it aptly when they said the plan was about as useful as an ashtray on a motorcycle," he said.

According to Mr Leahy, who said he was basing his opinion on the two-page press release given out by the Department, the scheme has "serious flaws".

"It appears that the only way they can be delivered at cost is for them to be built on local authority land that would otherwise be earmarked for those on our escalating housing waiting lists. This further deprives people who are dependent on the State," he said.

He said he believed that it was the availability of finance and not the affordability issue that was the biggest problem. Even if the cost of the land was subsidised by the Department of Environment, he argued, it was generally accepted that local authority houses usually ended up costing approximately 20 per cent more than those built by private developers.

He said that at cost price the houses could cost between £70,000 and £80,000, which meant that with a 95 per cent mortgage the Government would be sanctioning loans of up to four times the participants' salary.

"Building societies are only allowed give loans of 2 1/2 times the salary so the Government are breaking their own rules . . . If they could apply this criterion in the open market to the building societies a lot more people would be empowered to purchase their own homes," he said.

Others in the industry questioned whether given the current severity of land and labour shortages it was somewhat overoptimistic or "politically opportunistic" of the Government to announce the erection of almost 2,500 new homes over two years under the scheme.

A source in Dublin Corporation said that while the scheme did not represent a panacea for the ills of the housing crisis it was a welcome initiative.

"We welcome anything that addresses the issues surrounding the supply and demand of accommodation," he said. Responding to the question of land shortages, he said there were "a couple of sites" owned by the corporation in the Dublin area with potential for development.

A source in a separate local authority said that they were still waiting for the "nitty gritty" of the plan but that they also had sites which could be used under the scheme.

"The idea is very good. We would like to see it in operation as soon as possible, but the details are so flimsy it is difficult to see how it will work," said Tom Maher, of Tom Maher and Company Auctioneers, in Tallaght.

"There are lots of questions; including where they will build the houses, how they will control the price of them and how they will select the participants if it is oversubscribed. I worry if it has been sufficiently thought out and whether all the issues have been taken into consideration," he said.

The Irish Auctioneers and Valuers Institute rowed in this week with a cautious welcome and a list of criticisms. Its chief executive, Alan Cooke, asked how the local authorities would provide land for private building without curtailing the amount of land available for public-sector housing and called for more detail of how the "open market value" of the homes would be assessed.

This was in relation to the proposed "clawback" by the Government of the difference between the actual market value and the sale price if the house is sold within five years.

According to Kieran Murphy, director of the national housing organisation, Threshold, the scheme will be of "fairly substantial benefit" to between 5,000 and 8,000 people who will see savings in the price of a house of between 30 per cent and 40 per cent. "As such it is to be welcomed, but it won't help everybody," he said.

When the cost of the land was factored into the equation, he said, even the low interest rates could make monthly mortgage repayments somewhat excessive for modest income-earners.

A more radical approach to the crisis, he said, would be to place a requirement on all private developers that they must offer 20 per cent of housing schemes to local authorities at market value first.

"There would be a tremendous amount of opposition to this because private developers would fear that waiting list tenants would devalue the property," he conceded.