Land premium pilot scheme to launch

March 4, 2021

The Development Bureau today announced that it will launch a pilot scheme to charge land premiums at standard rates for lease modifications for industrial building redevelopment on March 15 to encourage revitalisation of such buildings.


The bureau said the pilot scheme aims to provide certainty on land premiums through promulgating a set of standard rates and expediting the completion of lease modification procedures for industrial building redevelopment, adding it will encourage revitalisation of those buildings through facilitating their early transformation into uses more compatible with the needs of society, and thus optimise the use of land.


The pilot scheme targets pre-1987 industrial buildings for revitalisation and will run for two years.


The bureau said those buildings were constructed before the Fire Services Department tightened the fire safety requirements in 1987 and they have relatively less adequate fire service installations and could pose safety risks to users and society.


Promoting the redevelopment of those buildings is a more fundamental way to address the safety problems than enforcement or upgrading of installations, it added.


Under the pilot scheme, standard rates, which have been formulated with reference to a basket of relevant market data, are set for five broad regions in Hong Kong and three types of uses involved in lease modifications for industrial buildings, namely industrial/godown use before redevelopment, as well as commercial/modern industrial use and residential use after redevelopment.


The standard rates will remain unchanged for the scheme's two‑year period for greater certainty. During the period, industrial building owners may compute the land premiums payable based on the uses and gross floor areas before and after lease modification by applying the promulgated standard rates, to consider whether to apply for lease modification for redevelopment of their buildings.


The Lands Department will issue a Practice Note on March 15 for industry reference on the pilot scheme’s operational details, including how lease modification applicants may exercise the right to opt for calculating land premiums by standard rates, the transitional arrangement applicable to lease modification cases under processing, and the calculation of gross floor areas.

The bureau stressed that the pilot scheme’s objective is not to provide premium concessions for owners, but to enhance the certainty on land premiums payable to expedite industrial building revitalisation.


Standard rates are not tailor-made for individual cases, and hence cannot precisely reflect the attributes of individual cases, it added.


If lease modification applicants do not find it attractive to have land premiums calculated at standard rates, they may opt to have their cases processed using the existing conventional approach for land premium assessment.


The 2020 Policy Address announced that the Government would implement a pilot scheme for charging premiums at standard rates, as another initiative to encourage revitalisation of industrial buildings following the two rounds of industrial building revitalisation schemes introduced in 2010 and 2018.


As at December 2020, about 60 redevelopment applications had been received under the two rounds of schemes, of which 14 applications completed lease modification and about 40 obtained planning permission.


Additionally, owners of some 150 industrial buildings had applied for wholesale conversion under the schemes, and approvals were given for 140 of the buildings.

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