Contracts for the 57,400 homes, 2,400 of which are empty, were exchanged between the Annington Homes consortium and the Government yesterday. They will be handed over on completion in six weeks' time.
The chairman and founder of the Japanese Labour Camp Survivors Association, Bill Holtham, said his members, who are taking legal action against the Japanese over their treatment during the Second World War, were furious about the deal.
Mr Holtham said: "We are extremely annoyed with the Government. For them to do this is extremely insensitive."
On hearing of the involvement of the Nomura International Bank of Japan in the consortium, Mr Holtham said: "The issue of human rights in this country has now been superseded by commercial interest."
The deal will bring in urgently needed cash to the Exchequer shortly before the Budget, giving Chancellor Kenneth Clarke greater leeway to make election-boosting tax cuts. Just pounds 100m of the proceeds will be retained by the Ministry of Defence to upgrade all married quarters over the next five to seven years.
Mr Holtham was worried about the fate of the service personnel under their new landlords, even though they will be given a discount for mortgages on ex-MoD houses.
The first year of the deal will cost the MoD an estimated pounds 111m in rents.
Labour is furious that the consortium includes major contributors to Conservative Party funds. Among them is Hambros Bank, whose chairman, Lord Hambro, is the party's honorary treasurer. Hambros has pumped pounds 300,000 into Conservative coffers since 1992, according to Labour.
Shadow Defence Secretary Dr David Clark said: "It is scandalous and disgraceful that our service families' homes should be sold off in order to line the pockets of Tory backers.Reuse content