NEW World Development Co is to invest $2.5 billion to expand Telford Gardens and to develop a new headquarters for the Mass Transit Railway Corp (MTRC). The development will include a 32,000 sq metre shopping arcade and 51,000 sq metres of office space at Telford Gardens. A twin 14-storey office tower is to be built on top of the retail complex. MTRC is assisting New World by providing information on how Mass Transit Railway (MTR) traffic interchange capacity can be increased. MTRC will retain 25,000 sq metres of the development for its headquarters, which will be bought at 1996 market prices, which is the expected completion date. Work on the projects began yesterday. The projects were a result of growing MTR traffic and MTRC's need for more office space, said MTRC chairman Hamish Mathers. The traffic interchange at Telford Gardens serves all stations in east Kowloon. More bus lanes, passenger pick-up points for cars and taxis and 200 parking spaces are planned. The redevelopment will link Telford Gardens to the MTR station in Kowloon Bay. When completed, the development will be one of the largest retail complexes in east Kowloon. The development is expected to cater for about 560,000 residents in the area. New World chairman Cheng Yu-tung said the company had residential projects coming to the market on Robinson Road, Lyttelton Road and a joint-venture with Land Development Corp on Li Chit Street, Wan Chai. He declined to comment at this time on negotiations for a large site in east Kowloon, adjacent to Laguna City. ''In negotiations, not just one side can control. I haven't bought it yet,'' Mr Cheng said. Previously, New World and MTRC jointly developed Felicity Gardens, Fortress Metro Tower, the second phase of Kornhill and Park Tower. They also participated in a 50-50 joint-venture redevelopment of the old Carlton Hotel site at Tai Po Road, Kowloon.