MTR wins approval to build on sites
The government yesterday gave MTR Corp the right to develop big residential properties on two premium sites, at an estimated cost of more than HK$88 billion, along the routes of the planned South Island Line and Kwun Tong Extension.
The development rights are meant to help fund the HK$17.7 billion cost of building the new train routes.
The government said the subsidies were not excessive and that the proceeds from development on these sites would actually fall below the expected funding gap, even on the best market outlook.
However, with a total gross floor area of 5.23 million sq ft for residential development, the MTR could pocket HK$13.08 billion if it can make a profit of HK$2,500 per sq ft.
In addition, it will profit from the 1.31 million sq ft of gross floor area for commercial development and 505,908 sq ft for a shopping centre and other facilities at Wong Chuk Hang, on the South Island Line.
The Executive Council yesterday approved a proposal to bridge the two rail lines' funding gap - a shortfall between the projected fare income and the lines' construction costs - by granting it the development rights of a 7.17 hectare parcel at the old Wong Chuk Hang estate and a 2.6 hectare site in Ho Man Tin.
Construction costs of the South Island Line have jumped 77 per cent to HK$12.4 billion and the Kwun Tong Extension by 26 per cent to HK$5.3 billion in the past five years due to increases in material costs and amendment of the routes.
The Transport and Housing Bureau said in a document to lawmakers that the Wong Chuk Hang development could at best fetch a profit of HK$7.6 billion, and possibly as little as HK$6.6 billion - far from the total needed to build the line.
The shortfall for the Kwun Tong Extension would range from HK$100 million to HK$1.1 billion.
Surveyors expected the Wong Chuk Hang site to yield HK$62 billion and Ho Man Ting to bring HK$16.8 billion in auction. But Centaline Surveyors executive director James Cheung Kin-tat said MTR's gain would be much less than this.
'MTR still has to pay the government a land premium,' Cheung said, 'and of course there are also development costs, and upon completion it will have to share the sales proceeds with the developer, and we are talking about at least 10 years from now, there are some risks that the MTR would bear.'