Iraq's investment commission and a South Korean construction firm unveiled a "master plan" on Thursday to develop a sprawling suburb of Baghdad with 100,000 homes in a $7.25 billion deal.

The final contract for the Besmaya redevelopment project has yet to be signed, but promotional material displayed at a news conference promised a "new home for 600,000 Baghdadis", a day after commission chief Sami al-Araji told AFP new housing was Iraq's top priority.

Hyun-Chung Kim, the head of project developer Hanwha Engineering and Construction, said the project's margins were razor thin, and that the firm had signed the deal largely to open the door to future construction deals.

"The cost of construction for housing we have agreed, of $500 (per square metre), is very, very challenging," he told reporters.

"I don't see any (profit) margin for construction, to be honest with you."

He later added: "We came here to make this happen, and (are) looking for another job to come in."

Kim said he hoped the final contract will be signed next month, and a marketing campaign to sell the apartments begin after the Eid al-Fitr holiday that follows the Muslim fasting month of Ramadan, that concludes next week.

A total of 830 apartment blocks are to be built, each with 120 apartments over 10 floors. Eight flats per floor will be 100 square metres (1,076 square feet) in size, while the remainder will be 120 and 140 square metres.

The apartments will be built in a circle surrounding what is envisioned to be a central business district, with schools, hospitals, public services and markets.

Hanwha is responsible only for the housing, and deals have not yet been reached for the remaining facilities.

The first of the flats will be delivered two years after construction begins, Kim said, with 20,000 new apartments being completed each year.

Araji said on Wednesday that new housing was the country's top priority in terms of attracting foreign investment. Iraq is seeking to build one million new housing units nationwide in the coming years.

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