The former Peterborough District Hospital site has been sold to developers for £7.75m.
Lands Improvements Holdings have bought for the 23-acre site in Thorpe Road which has been derelict for the last three years.
Nine years ago, the site had been expected to fetch about £20m.
Peterborough and Stamford Hospitals Trust will receive £7.44 m in six stages over the next five years.
The trust could potentially receive further payments through a profit-sharing agreement it has secured with the developers when monies will be handed over to the trust as the land is sold.
Cambridgeshire and Peterborough NHS Trust, which provides community, mental health and learning disability services, owns a building on the site and will therefore receive £311,000.
Dr Peter Reading the interim chief executive of the Peterborough and Stamford Hospitals Trust defended the sale price saying: said: “This was the only offer on the table.
“At every step of the sale process we have taken expert advice to ensure we are receiving the best price for the land.”
The land has outline permission for up to 350 homes and a primary school.
Kevin Moriarty, managing director of LIH, said: “There is a huge amount of work to do.
“We will have to spend hundreds of thousands of pounds securing the site and also on preparing a planning application.
“We hope to consult with local people early in the new year and expect to submit a planning application by next summer and hopefully begin demolition by the end of next year.
“It will be a complex project, and there is a huge amount to be done in terms of planning, remediation, demolition work and installing new infra- structure.
“But the end result will be a vibrant new area and we look forward to sharing our plans with the people of Peterborough in the new year.”