The California Public Employees' Retirement System is selling a portfolio of 28 housing communities to a partnership between San Diego-based developer Newland Real Estate Group LLC and an affiliate of Japan's largest home-building company, Sekisui House Ltd <1928.T>, the Wall Street Journal reported.

Calpers, the biggest U.S. public pension fund, will sell the portfolio for $500 to $600 million, the Journal said, citing people familiar with the deal.

Calpers bought the property over the course of five years starting in 2002 and is likely suffering a loss of as much as 30 to 50 percent as the deal values each home site at no more than about $35,000, the Journal said.

The portfolio represents about one-fifth of Calpers' residential land portfolio and includes 16,300 vacant sites and thousands of acres of undeveloped land in 11 states.

Officials with Sacramento, California-based Calpers were not available for comment.

(Reporting by Kavyanjali Kaushik in Bangalore; Editing by Matt Driskill)