Under the board's definition, a serviced apartment is an establishment held under central management to provide residential accommodation with central air-conditioning.

At least 75 per cent of the units in a serviced-apartment project are required to be furnished studios or two-room units with a small pantry or kitchenette.

And the sizes of the units are expected to be between 430 square feet and 750 sq ft.

Those restrictions were not stated in the board's previous definition.

Analysts said new requirements such as provision of central air-conditioning facilities meant developers would pay high construction costs for their serviced-apartment projects.

Under the new guideline, the board may permit larger units or a higher proportion of units with more than two rooms in certain areas of the Central Business District where there is a cluster of grade-A offices.

The board said serviced-apartment projects should also be provided with communal facilities, such as dining hall, laundry, recreational facilities and housekeeping services.

Analysts said that, compared to the former definition, the new guideline would tend to prevent developers from building 'apartment-like' projects rather than 'hotel-like' projects.

However, the new definition does not alter the existing plot ratios allowable for serviced-apartment properties.

That made investments in serviced apartments remain attractive, according to analysts.

Planning Department chief town planner Wilson So said that the new guideline would not affect the existing plot-ratio restrictions for serviced apartments.

The Buildings Department usually allows a plot ratio of 8 to 10 times for serviced-unit projects in a commercial zone such as Kowloon.

By comparison, developers of sites in residential zones in Kowloon could only build apartments with a maximum plot ratio of 7.5 times.

This meant an eligible serviced-apartment project would have a higher plot ratio than residential projects in the same districts, observers said.

Cushman & Wakefield director Simon Chow Chi-ping said he believed developers would continue to apply for such serviced-apartment projects despite the higher development costs.

'Developers applied to build serviced apartments because they have no choice,' he said.

This was because demand for office and hotel space remained weak and residential properties were not allowed to be built on their sites, which were usually zoned for industrial or commercial uses, he said.

But developers would face more obstacles when marketing their projects because end-users usually did not like central air-conditioning.

Because of the weakened state of the commercial, hotel and industrial sectors, developers have been rushing to turn their projects into serviced apartments.

Cheung Kong (Holdings), Sun Hung Kai Properties and New World Development all recently have applied to convert projects into serviced apartments which, if approved, would allow them to provide a total of 2.3 million sq ft of space for serviced apartments.

The three projects are in Tsing Yi, Tsuen Wan and Tsim Sha Tsui.

These projects were expected to be affected by the new guideline, said analysts. At the least, their building designs would have to be revised to comply with the refined definition of serviced apartments, they said.

Developers have no choice . . . demand for office and hotel space remains weak and residential properties are not allowed on their sites