LONDON, June 4 (Reuters) - U.S. private equity giant

Blackstone has agreed to buy 1,750 new homes to rent from

British housebuilder Vistry, as institutional investors

bet on a shortage of rental properties.

Large investors are increasingly putting cash into rental

homes which have fared better than other commercial property

sectors such as offices and retail, through a period of soaring

borrowing costs and changing working patterns.

Vistry said on Tuesday it had agreed terms with Blackstone

Real Estate and minority investment partner Regis to buy the

homes with a development value of 580 million pounds ($740

million).

This is Blackstone's second acquisition from Vistry in eight

months, after the private equity firm bought more than 2,800

mixed-tenure new homes in November.

"Institutional private capital can play an important role in

providing high quality housing stock across the UK, particularly

in the private rented sector which is significantly

undersupplied today," said James Seppala, head of European Real

Estate at Blackstone.

The latest portfolio, concentrated in the southeast of

England, will be managed by private rented sector housing

provider Leaf Living, which is backed by Blackstone and Regis.

The first completions under the agreement are expected by

the end of this month, with the majority of homes expected to be

completed within the next two years.

Vistry has sounded a more optimistic note on the housing

sector than its peers in recent times on the back of resilient

demand for its affordable homes, mainly from housing

associations and the private rented sector.

Last month, Vistry raised its annual homebuilding target by

about 3% to over 18,000 units after rivals, including Taylor

Wimpey and Persimmon, warned of subdued market

conditions this year.

($1 = 0.7839 pounds)

(Reporting by Aby Jose Koilparambil in Bengaluru and Iain

Withers in London; Editing by Nivedita Bhattacharjee, Eileen

Soreng and Sriraj Kalluvila)