Shui On Construction & Materials could see sharp declines in net profit over the next two years following significant changes in Government housing policy, says chairman Vincent Lo Hong-sui (pictured). He says cuts in production of subsidised housing are hurting the Hong Kong construction sector. The group recently secured two new contracts - Pak Tin Estate Redevelopment phases three and four and Castle Peak Hospital phase-two stage-two - worth a total of HK$1 billion. Mr Lo said the profit margin of 8.1 per cent achieved by the company last year could not be sustained. To diversify away from the Hong Kong construction industry, Shui On has acquired a China property project, Rui Hong Xin Cheng in Shanghai, from its major shareholder. Mr Lo expects this project can contribute to its bottom-line for the year to March 31, 2003. Resettlement of affected residents on the site is under way. Executive director Raymond Wong Fook-lam said Rui Hong Xin Cheng required an investment of HK$1.3 billion to HK$1.4 billion while the company was in talks with banks for a project loan of HK$700 million to HK$900 million.