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The Government has agreed to bear construction costs of up to HK$1 billion for public facilities at Mass Transit Railway Corp's (MTRC) Dream City development in Tseung Kwan O.

The MTRC has spent three years struggling to gain government concessions that would exempt the railway company from shouldering the costs of associated government, institution and community (GIC) facilities in the massive real-estate project at the Tseung Kwan O extension's proposed depot in Area 86.

Lands Department deputy director John Corrigall confirmed an agreement had been reached in principle with the MTRC to settle the terms of land grants for the project.

He said the Government would take into account the cost of building schools for future use when assessing land premiums.

The Government normally requires developers undertaking projects on sites earmarked for comprehensive development areas (CDAs) to bear the costs of building the affiliated public facilities.

However, such costs are not taken into account when the Government assesses land premiums for the sites.

MTRC has proposed to develop a 32.2-hectare CDA site in Area 86 into a Dream City - the largest comprehensive development in Hong Kong - providing 17.35 million square feet or 21,500 flats in 50 residential blocks to accommodate 60,000 people. It will include a retail area of about 430,000 sq ft.

The whole development will be divided into 14 phases to be built over the next decade.

MTRC property director Thomas Ho Hang-kwong said earlier this month that the firm would begin the tender of the Dream City development in the first quarter of next year.

Under the planning proposal, certain GIC facilities including seven schools, community centres and two public transport interchanges have to be incorporated into the development.

Sources said the MTRC had spent three years in negotiations with the Government over the waiving of the construction costs for the facilities.

'Recently the Government had agreed in principle it would be responsible for the cost of seven schools,' said one source.

Surveyors estimated the construction cost of the schools amounted to HK$1 billion, given each was worth about HK$150 million. The cost concessions should increase the appeal of the development to developers, analysts said.

Mr Corrigall declined to reveal the exact amount of money the MTRC could save but said it would be 'not a small amount'.

'Under certain circumstances, costs can be claimed if the Government agrees the facilities will serve a wider community,' he said.

In the Tseung Kwan O case, he said, the Government would take into account the cost of building the schools as they would be turned over to the Government on completion.

However, he said the building costs could not be deducted directly when charging land premiums.

It could not be claimed unless construction of the schools had been completed in accordance with the Government's requirements, he said.

The construction costs would be taken into consideration when assessing the land premium but it would not be a reimbursement, Mr Corrigall said.

He said the Lands Department would devise a mechanism for returning the constructions costs to the MTRC.

The Government could not exempt MTRC from all of the construction costs when calculating the land premium because the schedule for school construction depended on MTRC's decision on proceeding with the development, he said.

Sources said the Government would only pay the developers after the schools were completed and it had conducted its own valuations of costs.

'The Government will take an active role to decide how many schools should be built and how much each will cost,' the source said.

The final payout could be much lower than HK$1 billion as the number of schools built depended on population growth.

Mr Corrigall said the cost for GIC facilities could not be claimed if the project was approved under a planning consent.

That means a developer would have to shoulder the costs of public facilities if they were proposed as a prerequisite to secure planning approval for the development.

Gold Rich Consultants director Francis Lau Tak said the Government could make concessions during a sluggish market in order to encourage developers to proceed on lease modifications of certain large-scale developments.

MTRC is now negotiating with the Government on a land premium of more than HK$1 billion payable for a 1.53 million sq ft residential and retail development at Hang Hau Station along the Tseung Kwan O extension. The project, which provides 2,133 units in six blocks, is expected to be offered for tender next month.

The company has another 2.69 million sq ft residential and retail project in Tiu Keng Leng Station, including 3,519 units in nine blocks, to tender at a later date.

Graphic: area86gwz



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