Development Bureau introduces land, tenancy reforms

The gov’t allows greater flexibility for short-term tenancies, with some sites eligible for up to 21 years.

The Development Bureau has announced two new measures aimed at speeding up industrial and non-residential development: a three-year pilot scheme called “Pay for What You Build” and a new option for longer government land tenancies of up to 21 years.

Under the pilot scheme, which begins accepting applications on 1 June, developers involved in lease modifications or land exchanges for non-residential projects can build in phases.

The first phase must account for at least 60% of the site’s maximum allowable gross floor area (GFA) and must be completed on schedule.

Land premiums for this stage will be calculated only on the value of the GFA built in the initial phase, rather than the site’s full development potential.

After completing phase one, developers may choose whether to proceed with the remaining development.

If they do, they must apply for a lease modification within 10 years and will pay land premiums based on market conditions at that time.

If they do not proceed, the site will be subject to restrictions on sale or transfer for 10 years after completion of the first phase, unless the Lands Department approves further development through a lease modification process.

The government said the restrictions are intended to manage cases where multiple owners may not agree on whether to continue with later development phases.

After 10 years, if no further application is made, unused development rights may, upon application, be reassigned to other nearby sites.

Separately, the government is extending flexibility in short-term land tenancies.

Certain sites may be offered with total tenures of up to 21 years, subject to policy approval.

The structure would typically be a 7-year initial term with up to two renewals of 7 years each.

Rent will be reviewed only at renewal points and may be adjusted up or down.

The bureau said the longer structure is meant to replace the current model, where many tenancies last no more than seven years, and that different sectors may be offered different term lengths depending on their requirements.