The State-backed lender for builders and developers has trebled the value of loan approvals in the six months to the end of July.
Home Building Finance Ireland, which was established in January of last year, had approved €340m worth of loans by July, up from €114m in the six months to the end of January.
A key driver of the increase in funding approvals was a new €200m Covid Momentum Fund, which was launched in May to kickstart development projects as building resumed following the Covid-19 restrictions.
The so-called 'step-in' fund was targeted at builders commencing large developments in prime locations in cases where funding may not have been available from other sources.
By the end of July, almost all of the fund had been committed.
Given the strength of demand for the funding, an additional €100m has now been committed.
HBFI was initially established with a fund of €750m from the Ireland Strategic Investment Fund with the aim of facilitating the construction of up to 7,500 homes over five years.
The €340m allocated by the end of July supported the development of almost 1,500 units across 29 developments in 16 counties.
Social housing projects accounted for just over a third of the new homes approved for funding.
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The average development size was just over 50 units with the average facility size increasing from €6m to €12m.
That was partly accounted for by a decision to more than double the upper limit for individual HBFI loans from €35m to €75m, as well as agreeing to back major apartment developments for the first time.
"Housebuilders have experienced unprecedented challenges since the onset of Covid disruption and we moved quickly to establish a range of effective supports to ensure continuity in the supply of new homes," Dara Deering, chief executive of Home Building Finance Ireland, said.
"We will continue to engage with the sector to bring forward additional solutions to support housebuilding in due course."
Finance Minister Paschal Donohoe said the decision to increase the size of the Momentum Fund was based on the strength of demand since its launch in May.
"Absent the availability of this funding, it was likely that the commencement of construction on these sites would have been delayed, resulting in delays in the delivery of new homes," he said.
"While traditional lenders continue to navigate their way through the impacts of Covid-19, I feel it is an appropriate step by HBFI to increase their Momentum Fund by a further €100m at this time to ensure funding is available for these housing schemes over the coming months," the Minister added.
The Central Bank estimates that 34,000 units would have to be constructed per year over the next decade in order to meet demand.
The total for 2020 is on course to fall well short of that with under half of that annual target likely to be met.
Speaking on Morning Ireland, Ms Deering said the housing market had been under-supplied for much of the last decade.
She said it was appropriate that HBFI stepped in as the construction sector was getting back up and running after the pandemic restrictions to ensure that supply was brought back on stream with as little delay as possible.
"The reality is that the banks had to respond across the board from mortgage holders and personal customers to SMEs. As a state lender set up to focus on the residential sector, it is appropriate that we step in to ensure supply is not disrupted due to finance constraints," she said.