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Newly built homes in Yorkshire will be demolished by the HS2 rail line, the government has confirmed.

The line's eastern route, to Leeds from Birmingham, will run east of Sheffield, with some trains going into the city via a new spur and existing lines.

But 16 of 216 homes on a housing estate in Mexborough will be demolished.

The government's preferred routes, from Crewe to Manchester and from the West Midlands to Leeds, were laid out last November.

Earlier the government announced seven contracts worth nearly £7bn for some of the line's civil engineering work between Birmingham and London.

The Department for Transport (DfT) said the full line would connect Birmingham, Manchester, Liverpool, Leeds, Sheffield and the East Midlands in a Y-shaped network, with all of them being linked to London by the line.

"Britain's new railway line will bring huge economic benefits across the country and help ensure this government delivers on its promise to spread wealth beyond London and the south-east," said the Transport Secretary, Chris Grayling following the announcement.

He dismissed claims that the project will end up costing significantly more than the £55.7bn budgeted.

Speaking in the House of Commons later he said: "There have been some wild rumours, I have to say, in the last 24 hours about the cost of the project, based on, frankly, a finger in the air by people who are not involved in the project.

"I would simply remind the House that it is incredible, inconceivable and simply nonsense to suggest that HS2 will cost five times the amount HS1 cost per mile.

"This project has a cost attached of £55.7 billion for the whole thing, it is currently on time and on budget and I expect it to stay that way."

'Worst possible news'

Residents of the Shimmer housing estate in Mexborough have disputed that only 16 houses will be demolished by the new line.

Karen Schofield, whose family farm is also on the proposed route, told the BBC that the government's decision was "unthinkable".

"It's the worst possible news that anybody wants to hear, that you're going to lose your family home, which my husband and his brothers... they bought, what, 40-odd years ago," she said.

"There's horses, there's stables, we've provided employment for local communities... and it's ok HS2 saying they're going to compensate like-for-like... we've invited them to come down here and have a look what we've built up over the years."

The government admitted that its existing compensation scheme - which offers homeowners the "un-blighted" value of their home plus 10% - would not be enough to allow the Mexborough residents to buy an equivalent house locally.

"The particular circumstance of the Shimmer estate development could mean that the statutory compensation package may not allow homeowners to acquire a similar property in the local area," the Department for Transport said.

The government will now devise a plan with local residents and political representatives, which would "ensure Shimmer homeowners can secure a comparable local home," the DfT said.

For and against

The government's final route means that no new stations will be built in South Yorkshire.

Ed Miliband, the Labour MP for Doncaster North whose constituency covers the Shimmer estate, said putting the line through his constituency was "wrong and perverse".

"It flies in the face of evidence, logic, and above all, the economic needs of South Yorkshire," he said.

"The government and HS2 should be ashamed about the way they have gone about this decision. Their arguments do not add up, the consultation was a sham, and the residents have been ignored," he added.

But Philippa Oldham, of the Institution of Mechanical Engineers, argued that the overall HS2 plan would be of benefit to the country.

"By freeing up the capacity on the East Coast Mainline, West Coast Mainline, through the HS2 route we'll be able to shift some of our freight network onto the rail network from the road network," she said.

"So that will ease congestion on our roads providing that we have an integrated transport strategy."