Developers Lend Lease will start the first land release this month in the project expected to house more than 12,500 residents over a 20-year period.

Lend Lease communities' general manager Arthur Ilias said housing affordability was one of the strongest points of the 700-hectare development which would consist of about 5000 land lots.

The price of a block of land will start at $175,000.

"It's going to allow people to enter the market for under $400,000 for a house and land package," Mr Ilias said.

The development will have a diverse range of allotments and homes, in addition to the entry level product.

The first land release on March 28 comes in the wake of a report commissioned by the Property Council of Australia, which showed the Illawarra region was facing a critical housing shortage.

Calderwood Valley is expected to deliver about 12 per cent of the new dwellings outlined in the state government's Illawarra Regional Strategy.

Mr Ilias said the project would provide a continuous supply of residential land.

"That's what we can deliver," he said.

"It's a 20-year project with approximately 5000 lots and we will be able to continue to supply the market to meet demand."

Mr Ilias said Lend Lease had been inundated with inquiries from potential buyers. The first release will comprise 40 lots ranging in size from 300 square metres to 732 square metres.

"Since we started marketing at the beginning of this year we've had more than 1000 people register on our database," Mr Ilias said.

Calderwood Valley will eventually include a town centre with up to 20,000 square metres of retail space, as well as a village centre with about 5000 square metres of retail.

It is anticipated there will be three public schools (potentially two primary schools and one high school) and a childcare centre.

More than 25 per cent of the Calderwood Valley site, approximately 217 hectares, will be dedicated to open space. There will be a green network of reserves, walking and bike trails, as well as wetlands and ponds.

The development proposal for the site west of Albion Park has been the subject of much negotiation and court action over the past four years.

Last year Shellharbour City Council endorsed an agreement with Lend Lease in which the developer would provide community facilities including $28 million worth of parks and an $8.9 million sporting complex.

The first stage of the development was given the green light in the NSW Land and Environment Court in August 2013.

The Calderwood project was granted concept approval by former Labor planning minister Tony Kelly in 2010.

Calderwood was listed as a state significant site and rezoned to allow housing in early 2011, despite some community opposition.