Industrial buildings more than 30 years old will be torn down and replaced by residential blocks to increase housing supply and make better use of land in rundown areas, the Urban Renewal Authority says.
The URA plans to undertake 20 to 25 URA-initiated and demand-led projects at a total development cost of HK$25 billion in the next five years, the URA said. It expects to lose HK$100 million on the scheme.
The government is prepared to inject more money into the URA, an independent body, to facilitate the redevelopment, expected to cost HK$25 billion.
The first building the URA will work on is in Kennedy Town next to a station on the West Island MTR line now under construction. The site has been rezoned from industrial to residential use, so "redevelopment can begin promptly once property owners have been compensated", URA chairman Barry Cheung Chun-yuen said.
Cheung Hing Industrial Building on 12P Smithfield is a 40-year-old block with 14 owners. The 944 square metre site will be used to build 180 flats by 2019 at a cost of HK$1.2 billion.
The scheme is expected to create 4,500 residential flats over the next five years, of which about half will be smaller than 500 square feet.
The scheme targets dilapidated industrial buildings more than 30 years old, with little heavy industrial activity, and which occupy sites of more than 1,000 square metres. Not more than 30 per cent of the properties should be possessed by a single owner.
The Kennedy Town building, and another industrial block to be announced early next year, will be redeveloped first. Their success will guide future factory redevelopments.
The URA will pay industrial property owner-occupier the market value of his or her property (on vacant possession basis) plus an industrial ex-gratia allowance which is about 4 times the ex-gratia allowance basic rate adopted by the government times the saleable area of the concerned property. The prevailing basic rate is HK$2,200 to $2,370 per square metre.
Owners who do not use the space themselves will get one-and-a-half times the ex-gratia allowance basic rate adopted by the government times the saleable area of the concerned property. The other option is an owner-occupier may claim business loss in lieu of the ex-gratia allowance.
The building was being used for offices and storage.
The 14 owners learned of its fate only yesterday. Raymond Chan, chairman of the Cheung Hing owners' committee who operates an office on the fifth floor, said he and other owners would not accept compensation of less than HK$10,000 per square foot.
"This is prime real estate land that will be next to the new MTR station. Since they have rezoned the land for residential use, they should compensate us as a residential block, not as an industrial building as it is worth much less."
The authority said it would consider whether the flats to be built should be reserved for permanent-resident buyers, in line with the government's policy of "Hong Kong land for Hong Kong people".