Hutchison Whampoa has put on hold plans to build a luxury house at a government-owned green-belt site on The Peak after neighbours voiced their opposition and district councillors demanded a rethink.
The plans were part of a land swap deal with the government to preserve a neighbouring heritage building.
The developer, headed by Li Ka-shing, has withdrawn a rezoning application for the site on Coombe Road and one opposite that houses a 127-year-old mansion the company had earlier wanted to redevelop.
The Development Bureau said the company had withdrawn the application "with a view to taking into account the comments received and to make improvements on the proposal before submitting it to the Town Planning Board again".
A bureau spokeswoman did not elaborate and Hutchison Whampoa declined to comment.
Under the arrangement between the bureau and the mansion's owner, a Hutchison Whampoa subsidiary, the government offered the green-belt plot in exchange for the mansion site. Each site has an area of 1,100 square metres.
As a result, the company had applied to have the mansion rezoned from residential to heritage conservation and the opposite plot from green belt to residential use.
The withdrawal of the application last Thursday followed a request by Wan Chai District Council members at a meeting two days earlier.
"Councillors and residents think that the site to be swapped under the present proposal is not the only choice available," council chairman Suen Kai-cheong said.
"Residents consider that building a house there would cause nuisance and obstruct the view. The site is also adjacent to the Aberdeen Country Park, meaning the environment may be affected," Suen said.
"The government has provided insufficient information for us to decide whether to support or to oppose the plan. We don't even know the locations of possible alternative sites … We decided to ask the developer to withdraw its application and to do a more thorough consultation."
The head of a local owners' corporation, James Lim Kiam-leng, said residents would wait to see what the developer does.
"We don't think they are going to stop there," said Lim, chairman of the Incorporated Owners of C and D Carolina Gardens. Lim has collected signatures of flat owners opposed to the deal.
Central and Western district councillor Joseph Chan Ho-lim, who discussed the issue with the bureau's assistant secretary for heritage conservation, Queenie Lee Lai-kwan, on Friday, said he understood the government was open to the suggestion of finding another site for the swap.
The mansion is a European-style home built by Irish soldier-turned-barrister John Joseph Francis in 1887.