Developers factor in bonus area when bidding, 'so it's not free'

PUBLISHED : Saturday, 30 October, 2010, 12:00am
UPDATED : Saturday, 30 October, 2010, 12:00am

Developers factored in bonus floor area - given by the government in return for their providing 'green features' - when deciding what price to bid for a site, the Real Estate Developers Association said. Therefore it was unfair to say they got the bonus areas at no cost, it said.

The association was keeping all options open in response to the government's new cap on the bonus floor area a developer can claim for building such 'green features', its secretary general, Louis Loong Hon-biu, said.

A judicial review had not been ruled out, but nor had it been seriously considered.

'I can't rule out any possibilities,' Loong said after an association meeting. 'A judicial review is a very serious legal procedure and we haven't considered this direction yet.'

Loong said that when developers bought land at auction, the prices they bid took into account the bonus floor space they could get from including green features such as balconies and bay windows. Developers estimated the total floor area they could build.

Some developers are reportedly upset about the new rules, which take effect early next year, and are seeking legal advice and considering the possibility of a judicial review.

Under the new measures announced by the chief executive in his policy address this month, developers seeking bonus floor area would have to obtain certification from the Green Building Council, whose experts would assess the project's environmental performance.

The government also aims to limit the scale of new buildings by capping the amount of floor area devoted to 'green features' and amenities such as clubhouses at 10 per cent of the gross floor area of a development.

At present, they may be exempted from calculations of gross floor area. This has proved a bonanza for developers, who get the areas taken up by most of these facilities free of charge but sell them as part of the gross floor area of a flat.

The practice inflates the scale of a development but shrinks the usable area of flats for homeowners.

Chinese Estates non-executive director Lau Ming-wai said he had not heard about any legal challenges to the new rules.

He said the impact of the changes on Chinese Estates would be small, because it had already submitted building plans for its sites. Besides, he said, the company focused mainly on leasing and shopping malls.

Richfield Group Holdings, a Hong Kong-listed investment holding company providing property brokerage services, said tightening the rules on floor area would not affect its property purchases.

A Development Bureau spokesman said it had no comment on a possible legal challenge.

Limited area

New rules on the floor area of projects take effect next year

The amount of a development's gross floor area taken up by features such as clubhouses will be capped at: 10%