Developers pay a premium to the government when a modification or change in land use results in the plot having a higher value.

“The standard rates arrangement is an alternative to the conventional premium assessment mechanism,” the bureau said on Thursday.

“It aims to provide certainty to the premium amount and streamline development procedure to expedite development.”

The initiatives, announced in Chief Executive John Lee Ka-chiu’s October policy address, were designed to expedite land development and stimulate urban renewal.

The arrangement was introduced in March 2021 as a pilot scheme, which allows land premiums to be charged at standard rates, but applied only to industrial buildings built before 1987.

It was later expanded to cover two new development areas, Kwu Tung North and Fanling North.

The pilot scheme was designed to provide certainty on premium amounts for owners who wanted to redevelop industrial buildings and cut the time needed for negotiations on premiums.

Now the government will apply the same arrangement to farmland in the New Territories in a bid to speed up the pace of land acquisition and also to buildings for special industrial use.

The standard rate for a piece of farmland at Kwu Tung North before lease modification is HK$4,000 per square metre.

But, after modification, the amount would climb to HK$27,500 per square metre for non-residential use and HK$40,000 per square metre for residential use.

The new pilot scheme will cover 10 zones in Yuen Long, North district and Tuen Mun.

They are all in new town areas or within a 1km radius of existing or proposed railway stations.

The bureau said the pilot scheme would cover 24 cases of lease modification applications being processed by the Lands Department and provide 8,500 flats.

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Officials added that five planning applications were approved in the past five years which involved land covered in the pilot scheme, providing around 8,700 homes.

The level of standard rates will be announced in the first quarter of next year, and be subject to an annual review.

The scheme will also be regularised to cover buildings built for special industrial uses and constructed before 1987, including leather tanning, garment manufacturing, and food production.

These will have a 70 per cent standard rate before lease modifications compared with general industrial buildings.

The change was made to reflect the land value of the buildings, which are subject to more restrictive conditions under existing leases.

Stewart Leung Chi-kin, chairman of the executive committee of the Real Estate Developers Association of Hong Kong, said the move could incentivise businesses to utilise farmland in the New Territories. He added that the process of premium negotiation could last for at least two to three years.

But Leung warned that farmland often lacked transport networks and was not accessible by main roads, desirable for developers.

Lau Chun-kong, chairman of the Hong Kong Institute of Surveyors’ land policy panel, welcomed the changes but said he was worried the 30 per cent discount on the standard rates for industrial buildings for specific purposes might not be conducive to urban renewal.

“If the premium is too low, the owners may not be willing to redevelop the building, and might rather let it sit there,” he said.

“We hope the government can properly observe the market environment to assess if the discount can facilitate more redevelopments of old industrial buildings.”

But Lau said he expected a good response from developers when the new rules came into effect next year. He added that the annual review of the standard rates could help the government catch up with market trends.

“We predict that the government will significantly lower the standard rates before April next year, and some developers will adopt them, and help accelerate land development,” Lau said.

The bureau will broaden the in situ land exchange scheme, with the land size and ownership requirements to be relaxed.

Apart from Kwu Tung North, Fanling North, Hung Shui Kiu and Ha Tsuen New Development areas, the scheme will be expanded to designated zones in all new development areas, including Yuen Long South and the San Tin Technopole.

Industrial sites and privately run community or welfare facilities will be included in the scheme, in addition to private residential and commercial sites.

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If a land exchange applicant owns 90 per cent of the private land in a designated development site, the government may, at its discretion, help acquire the remaining 10 per cent of the land for the applicant to help in the development of better layouts.

The applicant would be required to pay full market premium for the entire development site, including the 10 per cent acquired by the government.

It would also need to construct public facilities as specified by the authorities, but a premium reduction would be granted.

Occupants affected by the land exchange applications would also be offered a government compensation and relocation package, but the applicant would need to reimburse the government for the costs involved.

“The revised arrangement could expedite the implementation of the Northern Metropolis and facilitate better development layouts by leveraging market forces,” the bureau said.

It added it would also “reduce the government’s upfront spending on land resumption and public works, while allowing the government to receive premium revenue earlier”.