Through Self-Build Wales, the Development Bank of Wales will guarantee loans on pre-agreed plots.
The loans will be repayment free until the new home is mortgaged, allowing people to build their new home and cover living costs.
Under the scheme, successful applicants can choose to use an approved builder or to do the work themselves.
Local authorities and housing associations will make plots available with planning and site requirements already completed.
Every plot will have a ‘plot passport’, including approved designs, an estimated build cost and options for personalising the home.
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Approved applicants can reserve a plot by providing a 25% deposit on the plot cost with the Welsh government – through the Development Bank of Wales – providing the rest of the funding.
Repayments can be deferred for up to two years or when the home is finished.
Julie James, housing and local government minister, said it wanted to make self-build available to many more people in Wales.
“Finding the land, navigating planning consents and being able to afford to self-build while covering the cost of living can be real barriers.
“We have launched this scheme in partnership with local authorities to overcome all of these barriers.
“This offers a route into home ownership for people who want to stay in their local area, but haven’t previously been able to afford to buy there.
“It also offers older and disabled people the opportunity to build custom-adaptive housing that meets their needs in the communities where they want to live.
“The scheme will launch in late spring this year, and in the coming months there will be more information available on the Your Home in Wales website."