Concessions on buildings' green features

Concessions on buildings' green features

Kit: Hello this is listening plus and you are with Young Post reporter Lai Ying-kit. Today we will be discussing a government plan to stop giving extra floor areas to developers for building green features. Joining me is Joyce Ng. She reports urban planning news for the South China Morning Post.

The proposal was hinted by Chief Executive Donald Tsang last month when he said he might introduce a law to require developers to provide green features without any concessions. So Joyce can you tell us more about the concessions?

Joyce: Sure. It is a practice that came in place in 2005. The government started to give developers extra floor areas for putting so-called green features in their residential developments. These features range from balconies, sky gardens, to mailing rooms and even covered walkways. When the developer gets a piece of land, in the land lease there is usually a maximum amount of gross floor area they can build. We call it GFA. But for these features, they don’t have to be included in the GFA calculations. So the practice has resulted in very bulky and tall buildings. It is partly because developers can put in the features and charge buyers for them when selling the flats.

Kit: So what are the reactions of developers to this idea of ceasing these incentives to give extra floor areas for building green features?

Joyce: They are opposed to the idea and not surprisingly they have strong reaction. This week the Real Estate Developers’ Association issued a press release giving their first formal response since a consultation was launched. They say the consultation approach is too simplistic and is not addressing the real issue. In the press release, they just say that everything should remain the same, there should not a cap or any limit on the concessions on granting these green features. Instead, they suggest, if the government wants to improve urban environment, why not simply stop selling urban sites and then just concentrate on land sale in the New Territories or in new areas like Kai Tak.

Kit: Why do they think a curb on these concessions are not effective in reducing bulky buildings in the city?

Joyce: There is a school of thought arguing developers object to this because they will suffer loss, especially for those lots they have brought but they have not yet built on. It is because when developers bid for a piece of land, when coming up with the price, they will take into account, those we call inflated areas they can build. So they end up coming up with higher prices. If now the government says we are no longer giving you extra floor areas, they will suffer loss for that. And that partly explains why they came with such a strong reaction.

Kit: Can you tell us more about the recent consultation that asked the public if they thought this concession policy should continue? Can you tell us more about the findings?

Joyce: The consultation has ended and the interim report says there was a general support for imposing a limit on these so-called green features. There is an increasing public aspiration saying we want less dense urban environment and we want shorter towers and wider streets. So there is a general consensus on that.

Kit: What do professionals such architects think of the plan?

Joyce: The architects, in general, support there should be a review of policy of granting extra floor areas. The Institute of Architects, for example, have come up with a proposal suggesting an overall cap on these facilities especially the balconies and gardens. But on the other hand, for those essential facilities such as the refuge storage room, the mailing rooms and metre rooms, we need these facilities anyway. So they think the government should continue to give the bonus areas for these essential facilities.

Kit: You mentioned earlier that the curb on these concessions could adversely affect developers’ profits. Can you tell us about the effect?

Joyce: It is because when developers came up with a price to bid for a certain site, they usually take into account the extra floor areas they can build. We take the example of Wedding Card Street redevelopment project, that is the Lee Tung Street redevelopment. It is a hypothetical calculation using figures available to the public. So under the project, the developers can build a gross floor area of about 61,300 square metres. If the concession remains, green features inflate the GFA by 23 per cent. 23 per cent has happened in some developments in the past. So if the concession remains, this will increase the GFA to about 75,400 sq metres. An estimation of how much money the project will generate can be done by multiplying the GFA with the average prize of a medium-size flat on Hong Kong Island. So we use the figure from the Ratings and Valuation Department. That is HK$104,194 per sq metre in September. The result is that the developer would earn HK$7.86 billion with the concession and HK$6.39b without them. This means, without the green concessions the developer would earn HK$1.47b less.

Kit: Do we know when will this proposal to curb the concessions go to the Legislative Council for discussion?

Joyce: The government is still tidying up the consultation results. A recommendation report is expected to come out early next year. The proposal will probably go to Legco like in the middle of next year.

Kit: Thank you Joyce. Thank you for being with us.

Joyce: Thank you. You are welcome.

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