Oxford City Council could receive £5mif houses and student flats are built at Slade Park Barracks, in Headington, papers obtained by the Oxford Mail show.

Confidential documents say the freehold value of the site is estimated between £6.5m and £10m and it is "ripe for development" - with a probable sale price of £7.75m.

The Mascall Avenue site is owned by the city council, but the Ministry of Defence's lease has 20 years to run.

However, the council could cash in on its asset now if a deal to sell the barracks, used by Territorial Army units, can be struck with the MoD.

The papers reveal planning officers are recommending that the proceeds from any sale of the 4.5-acre site are split, with 72 per cent to the council and 28 per cent to the MoD.

The ministry - through its property arm, Defence Estates - has applied to knock down the barracks to make way for student flats with 276 study bedrooms, along with 32 flats and 21 houses for other residents.

Part of the report, prepared on behalf of the city council by valuer Neil Evans, says: "The site is ripe for residential development and in order the city council is able to realise its development potential, it has negotiated an early surrender of the lease - the surrender projected to take effect from October 2007."

The city has been urged to cash in on the site, because at present it receives virtually no income at all, and otherwise could not realise the site's development potential for another 20 years.

The MoD's share of any sale proceeds would go towards building a new county TA centre, possibly at Dalton Barracks, Abingdon.

The council's executive was due to consider the possibility of selling the site in a private session yesterday.

In a report, Town Hall finance officer John Kulasek said final approval for a sale could be agreed by September next year. With work to build a new TA centre likely to take 18 months, the council would be likely to receive money from the deal in the 2008 and 2009 financial years.