By taking this step yesterday the government has avoided compensating tenants and owners in advance of redevelopment - a step that would have set a precedent.

Most of the houses in Nga Tsin Wai, Wong Tai Sin, will be knocked down and the 49,900 sq ft site will feature four 20-storey buildings erected on either side of the village entrance, elevated on 15-metre pylons. According to the architects, the purpose of elevating the towers is to maintain a holistic look to the village.

Barry Cheung Chun-yan, chairman of the Urban Renewal Authority, said they would study the existing village house policy to devise a compensation scheme for homeowners. Affected tenants will be given cash compensation or a public housing flat.

Mr Cheung said discussions with Cheung Kong (Holdings) - which owns 70 per cent of the land in the village - had been positive and they had not made any compensation offers to push ahead with the scheme.

'We are confident of reaching a fair deal that can take care of the interests of both parties and the public,' he said.

In a separate Legislative Council subcommittee meeting on heritage conservation, Secretary for Development Carrie Lam Cheng Yuet-ngor said giving compensation to residents before agreeing on the redevelopment plan would have set a bad precedent.

'If we don't follow the current procedures, it may bring undesirable consequences and lead to judicial challenges,' she said.

But legislators urged the government to compensate villagers first so that they could be in a better position to negotiate with Cheung Kong.

The managing director of the URA, Billy Lam Chung-lun, said it would cost about HK$100 million to buy the remaining 30 per cent of land from villagers. He said the authority would propose a compensation scheme to affected tenants and owners in three months.

Under the plan, which the authority claims will keep the 'original spirit of the village', three relics - the Tin Hau temple, a gatehouse and a stone tablet - will be kept along with a few houses connected to the village entrance.

Roy Tam Hoi-Pong, president of the advocacy group Green Sense, criticised the 'hybrid' design of the four buildings.

'The plan is ridiculous. It is hard to imagine how four buildings could be put at the four corners of Sam Tung Uk village in Tsuen Wan or in the Forbidden City,' he said.

However, the announcement was welcomed by the tenants still living in the village. Wong Chau-hung, 74, endorsed the 'belated decision'.

'The houses are all decrepit and the place no longer looks like a village,' she said. '[The redevelopment plan] has been in discussion for years but every time they end as empty talks. I will definitely miss this house after living here for 60 years.'

Village head Ng Chi-wing also welcomed the decision and believed the plan 'could make the ancestors satisfied'.

'The project, if it is implemented as suggested, can bring forth a revival of the original walled village,' he said.

First brick in the wall

After years of negotiation the scheme to develop Nga Tsin Wai has started

The cost of (in HK dollars) turning the village into a conservation park is about: $1.2b