Urban Renewal Authority right to pay for podium in redevelopment
I write to clarify the misleading allegations made by Albert Cheng King-hon in his column ("URA has turned its back on local residents in Kwun Tong redevelopment", February 28).
The arrangement for the Urban Renewal Authority to undertake the construction cost of the podium for public facilities and government accommodation at the Kwun Tong Town Centre project is a highly responsible and appropriate measure taking into account the present uncertain property market, and the mega scale and complexity of the project.
This will enhance the competitiveness of the tender bids while giving the URA better control over the construction progress of the project, which is crucial for the timely completion of public facilities and implementation of the project.
The public transport interchange, public open space, hawker bazaar and refuse collection point in the podium will be handed over to the government free of costs upon completion, while all the retail areas shall be owned by the URA.
The developer has no right to sell or buy these facilities and any part of the retail areas.
The residential parking spaces and structural elements related to the residential parts in the podium will be built at the developer's cost.
As the project is governed by a development plan approved by the Town Planning Board, the total permissible gross floor areas are fixed. Mr Cheng made a wrong presumption that the construction cost of the podium could be financed by allowing the developer to expand the plot ratio.
If the developer is asked to bear the cost, it will create adverse effects and financial uncertainties because:
- The high-cost upfront responsibility of the developer to build the podium not for generation of revenue will become a risk premium against the upfront payment offered to the URA, and reduce the back-end profit for sharing with the URA;
- The uncertainty of whether the developer can entirely recoup such additional upfront construction cost from the future sales proceeds of the flats in a long duration of six years will be reflected as a big risk premium to diminish the developer's tender bid; and
- It is against the prudent principle of maximising a tender bid under competitive bidding, if the URA does not take an approach to keep down well-perceived tender risks, widen tender participation and protect the financial attractiveness of the tender.
Angela Tang, general manager, external relations, Urban Renewal Authority