(Reuters) -UK's competition regulator on Thursday said its phase 1 review into homebuilder Barratt's 2.52 billion pound ($3.21 billion) all-stock deal to buy smaller rival Redrow had raised concerns in the local area around a Barratt development.

The Competition and Markets Authority (CMA) said Barratt and Redrow have till Aug. 15 to offer solutions, which would address the CMA's concerns and avoid the need for a reference to a full Phase 2 investigation.

For the one local area where the regulator has identified a competition concern, Barratt said in a statement it had identified undertakings which the company believed would address those concerns.

The area identified contains four Barratt developments, and a Redrow development that has fewer than 10 plots remaining to sell.

Barratt said the proposed undertakings will seek to address the future conduct of sales and build of the Redrow site.

The purchase of Redrow would cement Barratt's position as one of the largest builders in Britain in terms of both market value and the number of homes constructed. The merger is expected to boost the housing sector, which is emerging out of a challenging period.

(Reporting by Chandini Monnappa in Bengaluru; Editing by Rashmi Aich)