The government was also urged to suspend applications for building small houses in districts where the trading of rights was found to be most active, and ­tighten scrutiny of applicants’ ­living and finance conditions.

Since the small-house policy took effect in 1972, the government has allowed each male ­indigenous villager to build one small house – which has at most three storeys and a limit of 700 sq ft for each floor – in the New Territories countryside.

Entitled villagers could obtain land from the government by paying discounted or zero premium.

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The right is called “Ding”, which refers to male offspring in Chinese and demonstrates its ­exclusiveness to indigenous men.

By combing through the records of 42,131 small houses, which took up 224 hectares of land in all 642 indigenous villages, the study revealed that the suspicious trading of Ding rights has been most rampant in Yuen Long.

In the district in the west of the New Territories, 4,495 of the 14,981 small houses built since 1972 – or 46 per cent of the total – were suspected to have been involved in the illegal sales of rights.

Next were Tai Po and the Northern District, where the ­ratios were estimated to be 19 per cent of 8,492 units and 12 per cent of 4,926 units respectively.

Wong Shiu-hung, the researcher leading the study, said the database only included the dubious small houses that fulfilled certain characteristics.

“They are located in the village zones or village environs, grouped in three units or more, built with the same designs, and are ­managed like a proper private neighbourhood,” Wong said.

An insider interviewed by the researchers said that in Yuen Long, about 14 to 21 per cent of the ­Ding rights for newly built small houses were secretly bought by medium-sized companies connected with some of Hong Kong’s largest ­developers.

The insider also revealed that the developers usually spent about HK$7 million on building a house – HK$2.5 million of which was for the land – and could resell the house for HK$16 million.

Although the policy requires applicants to vow to the government that they had no intention to resell their small houses to any individual or developer, resale is ­allowed as a “last resort” for financial difficulties.

Paul Zimmerman, a district councillor for Southern District (Pok Fu Lam), claimed the government had been pretending not to know how it has been cheated by the villagers and developers.

“The Lands Department can do much more in terms of investigation, such as the land transactions, the finances and the villagers’ immigration records,” Zimmerman said.

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Barrister Tanya Chan Suk-chong, who is also lawmaker from the Civic Party, said public interest was affected when the government turned a blind eye to the abuse of Ding rights.

“The small houses have taken up large amounts of land and have brought harm to the countryside because many restrictions on constructions were waived,” Chan said.

Zimmerman said the research findings would be submitted to the government this week.

Chan Kim-ching, founder of the Liber Research Community, said his group would further study the relations between the Ding right and the traditional rights stipulated in the Article 40 of the Basic Law, which has been claimed by the villagers’ as the strongest reason for their entitlement to cheap land.

The Development Bureau has not replied to the Post’s inquiries.

The Lands Department said the characteristics adopted by the study to identify dubious small houses could not prove the illegal sales of Ding rights.

The Department vowed to report any case of illegal sales of Ding rights to the law enforcement department and called on anyone who has collected evidence of suspicious sales to report to the police or the Independent Commission Against Corruption.