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Edith Lin

Vivian Au

Hong Kong plans to speed up private projects by allowing developers who modify leases to pay a land premium for what they will build rather than for the maximum floor area allowed on the site, according to the development minister.
Secretary for Development Bernadette Linn Hon-ho raised the concept of “pay for what you build” on Wednesday as an alternative to the current arrangement where firms pay the land premium based on the plot’s maximum floor area they can build when they adjust their leases.
“The aim is to allow some developments to proceed earlier,” Linn said after meeting lawmakers.
Authorities may charge land premiums for modifying leases, such as changing a site’s purpose from agricultural to commercial.
Linn told a Legislative Council meeting that the government would look into applying the concept across the city.
“We hope to review and implement the measure as soon as possible if a flexible arrangement on lease modification can promote the use of private land,” she said.
The “pay for what you build” concept was first introduced in a scheme for revitalising old industrial buildings between 2010 and 2016.
Separately, Linn also said arrangements for short-term tenancies, under which government land can be leased for fixed terms of up to seven years, would be reviewed.
After the fixed term ends, the tenancy can be renewed on a periodic basis, or the site will be tendered again.
“We agree there is room to review whether short-term tenancies with a fixed term longer than seven years could be granted to encourage long-term planning and investment by industries and to meet the diversified demand for economic land,” she said.

But Linn noted that authorities had to consider the effects on the public coffers and that the government could receive a land premium payment in advance if it granted land for a longer term.
She also said tenants under longer leasing terms would face uncertainties brought by regular rent adjustments.
Linn added that the government would review whether it could adopt standard rents on short-term tenancies to save manpower for evaluations.
Development authorities would contact different bureaus to understand the needs of various sectors and offer flexible arrangements, she added.
Linn said the Lands Department was managing more than 5,800 short-term tenancies involving around 3,000 hectares of land as of February. Of these, 60 per cent were related to livelihood usage and the remainder were for commercial activities.
Lawmaker Louis Loong Hon-biu, secretary general of the Real Estate Developers Association, said the “pay for what you build” proposal could provide investors with another option, giving development projects more elasticity.
He said he expected the policy to especially benefit new areas, which might include different types of development, such as the Northern Metropolis, a scheme to transform 30,000 hectares of land in the New Territories near the border with mainland China into an economic powerhouse and housing hub.


Lawmaker Wendy Hong Wen welcomed the proposal, saying it could help to encourage different types of development.
Currently, developers paid a land premium based on the maximum floor area they were allowed to build when adjusting their leases, which in turn encouraged them to construct commercial property, she said.
Fellow lawmaker Edward Lau Kwok-fan agreed that the proposed plan could provide more flexibility for developers to invest money according to the actual needs of commercial sites, which could foster multiple developments.
Lau Chun-kong, managing director at real estate company Colliers Hong Kong, said he did not expect the proposed plan to replace the current model, with developers utilising both approaches.
“This could help reduce their initial investment,” Lau said.
He anticipated the move could promote industrial development, such as in the information and technology sector.


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Hong Kong housing

The Hong Kong government plans to incentivise private project development. Photo: Eugene Lee

Secretary for Development Bernadette Linn also says the arrangement for short-term tenancies is being reviewed. Photo: Jonathan Wong

Hong Kong to reduce dependence on land sales as major income source: Paul Chan

Hong Kong will pause land sales for commercial plots and change the purpose of some sites for other uses. Photo: Sam Tsang

Paul Chan (centre) says the government will only roll out eight residential sites in the coming financial year. Photo: Elson Li

Hong Kong floats land premium offer to boost interest in 2 large sites

A site in Hung Shui Kiu has 45 per cent of its 12.5 hectares reserved for “enterprise and technology park” purposes.  Photo: Winson Wong

News

Hong Kong

Society

Developers currently pay land premiums based on maximum floor area when they modify leases, development chief Bernadette Linn notes


Developers currently pay land premiums based on maximum floor area when they modify leases, development chief Bernadette Linn notes.


Hong Kong property

Legislative Council of Hong Kong

Property policies

Hong Kong land sale