Sun Hung Kai Properties (SHKP), one of the city’s biggest housebuilders, has reached an agreement with Hong Kong’s government to build more than 4,700 villas and medium-rise flats on a converted piece of farmland in Sai Kung, in a massive project. . The conversion of 4.97 million square feet of farmland at Shap Sze Heung near Sai Sha Road requires SHKP to fork out HK$15.9 billion (US$2 billion) in land premiums to the government, the highest ever paid in the city, according to market sources. SHKP declined to disclose the sum, but said it was “reasonable.” “Due to the complexity of the project, the group will invest substantial capital for infrastructure development including roads, bridges and improvements to the sewage system,” SHKP said in response to media queries. “The project could take eight years to complete due to the land’s remoteness from the city.” SHKP will build 4,730 apartment units, 31 blocks of villas, a primary school, a church, a sports ground and a shopping centre on the land, according to its development plan submitted to the government. The transaction, SHKP’s second since the HK$6.53 billion premium it paid to convert its Tuen Mun farmland into a 6,000-unit development, adds more than 10,000 units to the developer’s housing supply in the New Territories through the next decade. The developer, one of the city’s largest owners of farmland, said it is heeding the call by Hong Kong’s chief executive, Carrie Lam Cheng Yuet-ngor, to convert holdings of farmland into buildable areas for housing to ease the supply bottleneck in the world’s most expensive urban centre. Lam announced a plan in October to provide government subsidies and incentives for developers to build affordable housing for young, first-time buyers. “SHKP is taking the initiative and is happy to cooperate with the government to increase the supply of flats,” said the developer’s deputy managing director Mike Wong. Henderson Land Development, another major Hong Kong developer, had also been converting its land into housing, paying HK$9.6 billion in 2009 over its Double Cove project in Ma On Shan, also in the New Territories. SHKP’s premium is equivalent to HK$3,195 per square foot, considered low compared with the HK$3,252 premium on Henderson’s project, valuers said. “Some factors which may have pulled the land premium down include poor accessibility and lack of infrastructure serving the project, since it’s far away from the subway network, and there’s the lack of amenities in the area,” said Ingrid Cheh, JLL’s associate director of research. The property price for the SHKP project is estimated at an average of HK$17,000 per square foot, about 20 per cent more than the prevailing transacted prices in the neighbourhood, analysts said. “The development cost is about HK$6,000 to HK$7,000 per square foot, including construction cost, infrastructure and landscaping,” said Knight Frank’s senior director Thomas Lam.