A plan to impose business rates on private student accommodation developments in Scotland has been scrapped after property industry champions warned it could frighten off investors.

However, the politician behind the move has called for a review of the sector amid claims that developments are damaging the towns and cities that universities are based in.

Labour MSP Sarah Boyack said she has removed an amendment to the Non-Domestic Rates Bill that would have made private student halls liable for the levy.

Property specialists said last week the amendment could deter investors from backing developments that provide much-needed accommodation for students, while increasing costs for tenants.

Ms Boyack withdrew the amendment after consulting student representatives.

She noted: “Hard-pressed students were most likely to be adversely affected by this amendment, with landlords increasing rents to cover the cost of the newly-introduced rates.”

However, Ms Boyack said: “I am glad to have opened up further debate into the extent to which private landlords profit from buying up land in Edinburgh to produce student accommodation, but who pay little back towards the city from which they operate and profit.”

She added: “We have a dire shortage of residential accommodation in Edinburgh yet these new builds are essentially single-use: they cannot be converted into family housing and are designed purely for profit.”