The Olympic Delivery Authority (ODA) has been forced to renegotiate the contract to develop Stratford City after the two teams competing for the deal claimed the proposals were “unrealistic”.

Consortiums led by Lend Lease and Bouygues are shortlisted as partners to develop most of the £4bn scheme, including the Olympic village. Building has learned that both parties have demanded a subsidy to ensure they can make a profit on the 4,500 homes in the scheme.

The negotiations are likely to delay the appointment of a developer, which was expected this month. It is understood that the stakeholders in Stratford City (the ODA, developer Westfield and London Continental Railways) have agreed to a subsidy but are unclear whether they, or central government, will pay.

A source at one of the consortiums confirmed that negotiations were taking place on the level of subsidy needed to make the scheme viable. He said: “The whole deal was never going to stack up financially and it’s clearly going to have to be renegotiated. They are now having those discussions.”

The deal involves delivery of three-quarters of the £4bn scheme, including the athletes’ village and the bulk of the scheme’s legacy housing, commercial and hotel developments.

The two consortiums that emerged from the selection process are Lend Lease, East Thames Group and First Base, and Bouygues and Barratt Homes. The ODA, Lend Lease and Westfield, declined to comment. Bouygues was unavailable.