Developers likely to lose billions if bonus scheme goes
Developers who have assumed they will get extra floor area in return for adding 'green' features to buildings on land they have already acquired are likely to lose billions of dollars if the government goes ahead with a plan to scrap the bonus scheme.
In the 'Wedding Card Street' project in Lee Tung Street, Wan Chai, for example, two developers could see their income slashed by almost HK$1.5 billion without the extra area.
But a surveyor says this should not be a reason not to press ahead with the measure as 'investment always comes with risk'.
On Tuesday the Real Estate Developers' Association hit back at the government proposal to drop the practice of granting extra floor areas for the so-called green features and to require them to provide these by law.
Under the current practice, developers can build features such as podium gardens and mail delivery rooms without paying a premium for most of them, while including the items in the common areas for which home buyers have to pay.
The association warned officials to 'consider carefully' the impact of its proposal on the value of land they had bought but not yet built on.
A simple calculation might explain the developers' reaction.
The Lee Tung Street project, which is under planning after Hopewell Holdings and Sino Land won the site in June, allows a residential gross floor area (GFA) of about 61,300 square metres. If the concession remains and green features inflate the GFA by 23 per cent - as happened in some developments - this will increase to about 75,400 square metres.
An estimation of how much money the project will generate can be done by multiplying the GFA with the average price of a medium-sized flat on Hong Kong Island - HK$104,194 per square metre in September, according to the Ratings and Valuation Department.
The result is that the developer would earn HK$7.86 billion with the concessions and HK$6.39 billion without them.
Dr Poon Wing-cheung, of the Institute of Surveyors, said it was true that developers could have their profits trimmed on sites they had already acquired, because they usually took into account the extra floor areas when bidding for the land.
'But investment always comes with risk. You can't expect the policy to remain unchanged forever.'
Height restrictions in different districts had also cut development density without the owners being compensated, he said.
Lee Wing-tat, a Democrat who sits on the Legislative Council's development affairs panel, said the developers had gained enormously from the extra floor area practice. He urged the government to listen to the public, which had shown a preference for a less dense environment.
The Sustainable Development Council is expected to make recommendations to the government based on a public consultation by the middle of next year.
Profits squeeze
Lee Tung Street in Wan Chai is currently being developed
Without the 'green' concessions, the developers' income (in HK dollars) would be cut by: $1.47b
