Developer's plan to build HK$1m homes could hit govt coffers hard

Experts and lawmakers have welcomed debate on suggestions which may see affordable homes built on stretches of abandoned farmland. However, there were also words of caution on the proposal by one of the city's leading property developers to waive land charges on the proposed developments.

Developers in the city have spent decades acquiring cheap farmland in the New Territories from rural landlords. Typically, the developers apply for land use conversion when a site becomes ripe for large-scale development.

Henderson Land Development, for instance, has claimed to hold the city's largest agricultural land bank, comprising an area of 41.4 million square feet.

The Reach in Yuen Long, in which Henderson holds a 79 percent interest, is the most recent example of a village transformed into a dense residential neighborhood. The government had collected HK$2.864 billion from the developer for conversion of land use.

The government had actually pocketed a third of the revenues earned by the developer when Henderson sold a two-bedroom unit at the Reach for HK$3.75 million, or HK$6,600 per square foot, just before the end of last month.

Henderson Chairman Lee Shau-kee suggested on Sunday that if the government waives land premium fees, his company would be able to sell flats to small families at HK$1 million each.

While Lee's initiative to add affordable homes was welcomed by experts and lawmakers, all expressed concerns on the impact on government revenues and on the books of the big real estate developers.

Shih Wing-ching, founder of one of the city's two principal real estate agencies, Centaline, backed the developer's idea because it would be a "revolutionary" change of the government policy on drawing revenues from land sales.

The financial state of the government would permit decision makers make the choice, but Shih admitted that the bold change would be deemed unfair to developers and homeowners who have paid higher prices before.

Wong Kwok-hing, a lawmaker who chairs the Legislative Council's housing panel, said the bottom line was that taxpayers' interest must not be sacrificed amid the desperate search to boost supply of new homes.

Other approaches should also be considered in the debate, Wong said, as a total waiver of land premiums was not acceptable to him. "It would become a cash gift to developers at the expense of government reserves," he said.

Raymond So Wai-man, dean of the School of Business of Hang Seng Management College, agreed all suggestions merit discussions. But he added that there are just too many technicalities in Lee's suggestion that are hard to overcome.

Outlined to the press on the sidelines of an open event on Sunday, Lee's suggestion left many important questions unanswered, such as the ratio of cheap flats to be allocated and what restrictions are to be imposed to ensure the benefit goes to the neediest buyers.

As an alternative to the loss of government revenue, So proposed a discount on land premium charges if the developer surrendered part of the farmland to the government for public housing developments.

In the end, So said that there are already existing systems to cope with the demand for affordable homes. "When things are dealt in an unknown framework, you would easily run into ambiguity, misunderstanding and controversy," said So.

kahon@chinadailyhk.com

(HK Edition 01/08/2013 page1)