Tesco Plc, Britains largest supermarket chain, plans to build as many as 2,000 homes over the next three years as the grocer re-develops urban sites.

The retailer is planning to build a store and 960 homes in Woolwich, southeast London, as part of a £400m project. Tesco is also preparing to build 600 homes in Tolworth, Kingston-upon-Thames. Both projects are subject to approval by local authorities.

Tesco is turning homebuilder to help pay for the redevelopment of sites in urban areas, and to comply with government rules that encourage developers to mix both residential and commercial areas and include low-cost housing.

The supermarket chain said earlier this month it would spend £50m to construct affordable housing for its workers in Streatham, south London. The retailer also plans to re-develop its store in Londons Old Kent Road to build flats above.