Part of the University of Hong Kong's HK$2.5 billion campus plan falls foul of a Mid-Levels moratorium established in 1972 to restrict development in the area and prevent traffic jams.
The Lands Department said it was still considering the land grant application on the campus expansion, which involves three buildings with a floor space of about 42,000 square metres.
The administrative order caused a controversy 10 days ago after an ombudsman's report criticised the Lands Department for approving a 10-storey condominium above three levels of car parks on a lot allocated for a two-storey house with an 11-metre height limit.
The watchdog said the approval went against the intention of the moratorium and asked the government to review the order. But the government said the moratorium was only an administrative measure introduced on traffic and transport management grounds and was never intended to prohibit developments or redevelopments in the Mid-Levels.
A government study last year highlighted the problem of traffic congestion around the university.
John Malpas, the university's pro-vice-chancellor who is overseeing the project, believed the proposed development would not be restricted by the moratorium as nothing would be built on the area that fell within the Mid-Levels order's boundary.