The deal, predicted last week in Building, also includes a £1.9m payment that will be made if Northcountry Homes reaches performance targets set for the next two years.
Country & Metropolitan chief executive Stephen Wicks said the deal would allow the group to expand far more quickly than relying on organic growth.
Wicks said: "The acquisition will enable Country & Metropolitan to not only capitalise on the demand for affordable homes but also to increase our ability to compete with other developers on large-scale urban renewal projects."
Country & Metropolitan has been looking for an acquisition since it failed in a bid to buy Tay Homes last year. Tay was eventually taken over by Redrow.
The acquisition of the housebuilder, which will become Country & Metropolitan's third division, will create an enlarged group with a turnover of more than £100m next year.
The deal will enable us to capitalise on the demand for affordable homes
Stephen Wicks, chief executive, Country & Metropolitan
Northcountry has five brands – Pelham, Broseley, Arundale, Whelmar and Clarke – which Country & Metropolitan plans to retain. Under the deal, the housebuilder will continue to be headed by current chief executive Jolyon Harrison.
Northcountry, which operates in South Yorkshire, North Yorkshire, East Riding of Yorkshire and Northumberland, focuses on regenerating brownfield sites and building affordable homes. Its average plot costs £7000, and the average selling price is about £60,000. It sold 650 units in the year to 30 June, and the group's operating margins were 11%.
The purchase will allow Country & Metropolitan to build houses from £60,000 to £2m. C&M is based in west London and has offices in Yorkshire and Cheshire. Its unit sales are expected to be about 900 next year.
Country & Metropolitan is using loans to fund the deal. This means the group's debt will increase to £32m with gearing of 168%, compared with shareholder funds of £19m. The group plans to cut the debt over the next six to 12 months.
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