IT comes with a reputation of being one of Scotland's most haunted homes and now the crumbling 19th century castle is to be turned into a luxury boutique hotel.

Birkwood Castle in Lesmahagow, South Lanarkshire, is a Gothic mansion and former family home, which dates from 1860 and was once used as a hospital for mentally-disabled children.

Claims have been made that the building houses the ghosts of some of its former patients, and it has featured in televised paranormal investigations.

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But now the residence could be brought back to life in a £50million project by property tycoons Chris Naylor and Jo Lloyd. The developers plan to regenerate the 86-acre Birkwood estate with the castle as a focal point, and say they will build lodges and log cabins.

The land has belonged to Ms Lloyd since 2012, while the Naylor family came on board last year by buying a 50% share in the project.

Mr Naylor said: "Our family and the Lloyds have been friends for a few years and share the same entrepreneurial drive.

"When I heard about Jo's plans for Birkwood Castle they excited me and I knew it was a project we would love to get involved in.

"We've been in discussions over the past 12 months and are extremely excited that both our families will be working together to form the perfect partnership in making Birkwood a success."

The estate originally belonged to the MacKirdy family, and was used as a private residence until it was donated to the local authority in 1923. When the hospital closed in 2002, the Grade B-listed building was boarded up and it has lain empty since.

Several plans have been mooted to reuse the site but none have come to fruition.

A number of people have reported eerie goings-on in the castle down through the years, with most of the stories involving sightings of ghostly children.

According to local folklore, the apparition of a boy called Michael is said to stalk the grand spiral staircase where he fell and died, while a young girl's voice has also been heard crying and singing from within empty rooms in other parts of the castle.

Visitors and staff at the former hospital also reported smelling phantom cigar smoke, electrical disturbances and mysterious footsteps.

A doctor Henrik Richardson has also reputedly been seen sitting at his office window staring out years after he suffered a heart attack and died while working at the hospital.

Last year, ghosthunters Glasgow Paranormal Investigations filmed an episode of their series Haunted Planet TV there with the crew saying it was one of the most active locations in which they had filmed.

Delays brought about by the property crash have meant that previous redevelopment work could not go ahead, but plans are now ready to go before South Lanarkshire Council.

Ms Lloyd said: "It's been extremely difficult in terms of funding and there's been a huge amount of work we have had to do with professional reports.

"I imagine the locals will think that the project has fallen through as to look at the site there has been little structural change.

"There has been a lot of work carried out already that people are unaware of and we are now on the way to driving things forward."

Details of the development plans will go on show in Lesmahagow between Wednesday and Friday next week, from 11am to 8pm, at the resource centre. The exhibition will include a masterplan of the site, showing the key features of the project with both the Lloyd and Naylor families on hand to answer questions.

Planning permission will also be sought from South Lanarkshire Council with a decision expected in around three months.

If it is granted, work would be carried out in stages over several years, although the castle redevelopment would begin immediately.