2025-04-30 28Hse Editor
Secretary for Development Bernadette Linn Hon-ho recently revealed that the government is exploring several measures to make land administration more flexible. These include studying the feasibility of a "pay for what you build" approach, reducing construction costs, and streamlining approval processes to accelerate development.
Under the current land premium system, premiums are calculated based on the maximum permitted plot ratio and developable gross floor area of a site. Developers must pay the full premium upfront, leading to higher initial costs and greater financial risks.
The proposed "pay for what you build" model introduces flexibility, allowing developers to calculate premiums based on actual development scale and usage, or even make payments in stages.
Instead of paying for the maximum usable floor area, developers would pay premiums based on the actual area they plan to develop. For instance, if a site has a maximum plot ratio of 9x but the developer only intends to build 40% of the total scale, they would only pay 40% of the premium. If market conditions improve in the future, the developer could pay additional premiums to expand the development.
This approach would ease developers' short-term financial pressure by reducing the need for large upfront capital investments, thereby lowering financial risks. It could also encourage developers to bid for land more actively, ultimately safeguarding government revenue from land sales.
The concept of "pay for what you build" is not entirely new. Surveyor Albert So pointed out that a similar case occurred 50 years ago in Tsuen Wan’s Tai Uk Wai. A developer, unwilling to pay the full premium, requested the government to calculate the premium based on an approved building plan. The government agreed, stipulating in the land lease that the site could only be developed according to the approved plan, with the plan number recorded in the lease.
In addition to premium flexibility, the government is also addressing the shortage of private residential parking spaces. It is considering allowing developers to receive floor area exemptions without having to build underground parking. According to the 2023 Policy Address, exemptions would apply if the first two parking levels are built underground and the third at ground level, maintaining 100% gross floor area exemption eligibility.
The original restriction on underground parking exemptions was introduced to avoid "cake buildings," where multi-storey shopping malls or parking lots serve as a base for residential towers, resembling a layered cake. However, constructing underground parking is costly due to the difficulty of excavation and increased construction complexity.
With last year’s significant drop in land sale revenue and several plots failing to attract bids, the government believes exempting all ground-level parking floor areas from premiums would significantly enhance the attractiveness of land sales.
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