For discussion FCR(96-97)48
on 19 July 1996

ITEM FOR FINANCE COMMITTEE

LOAN FUND
HEAD 251 - HOUSING
Hong Kong Housing Society
Subhead 114 Sandwich class housing

Members are invited to approve the proposals set out in item FCR(96-97)26 for an increase in the approved commitment from $7 billion by $6.9 billion to $13.9 billion under Head 251 Housing Subhead 114 Sandwich class housing to provide for a loan to the Hong Kong Housing Society for the payment of land premia for Sandwich Class Housing sites for the construction of 10,000 flats from 1997 to 2001.



BACKGROUND

Members discussed Item FCR(96-97)26 at the Finance Committee meeting on 21 June 1996. In the light of Members' queries and comments, we withdrew the item and indicated that we would provide supplementary information in response to the points raised and resubmit the funding request for consideration by Members at a later stage.

2. Subsequently, we issued an information note to the Legislative Council Panel on Housing (the Panel). A copy of the note is at Annex A.

3. The Panel held a meeting on 3 July 1996 to consider the supplementary information. As requested at the Panel meeting, we now provide more details about the first two Sandwich Class Housing (SCH) projects in Tsing Yi and Ma On Shan at Annex B.

4. Another query raised in the Panel meeting concerns the procedures adopted by the Hong Kong Housing Society in the selection of consultants for the implementation of SCH projects. An information note to explain the procedures is at Annex C.

5. After the Panel meeting, we received a letter from the Panel, containing a number of supplementary questions from a member. The questions and our response are at Annex D.

Housing Branch
July 1996


Annex B

HONG KONG HOUSING SOCIETY Park Belvedere, Ma On Shan Area 92

No. of flats

882

Size of flats

(Largest)

(Smallest)

81.8 sq.m.

58.1 sq.m.

Full market value

(December 95)

$38,750.4/sq.m.

Discount to full market value

34.8%

Average sale price

$25,273.9/sq.m.

Selling price of flats

(Highest)

(Lowest)

$2,319,000

$1,240,000

HK$million

Sales proceeds

1,582.0

Total development costs

N1

Land

815.0

N2

Building costs

509.9

N3

Manpower costs

15.2

N4

Finance costs

205.0

N5 Cash surplus

1,545.1

36.9

N1 -- This is a typical SCHS project. The site was granted specially as a SCHS site.
N2 -- Building costs include foundation expensies, consultancy fees, superstructure expenses and other construction costs.
N3 -- Manpower costs include all staff costs which are directly identifiable to the project.
N4 -- Finance costs are higher because of the use of the external financing.
N5 -- All cash surplus has been reinvested to finance other SCH projects.

HONG KONG HOUSING SOCIETY Tivoli Garden, Tsing Yi Area 3

No. of flats

1,024

Size of flats

(Largest)

77.3 sq.m.

(Smallest)

59.0 sq.m.

Full market value

(December 95)

$37,996.9/ sq.m.

Discount to full market value

32.0%

Average sale price

$25,704.4/ sq.m.

Selling price of flats

(Highest)

$2,200,000

(Lowest)

$1,180,000

HK$million

Sales proceeds

1,748.8

Total development costs

N1

Land

543.5

N2

Building costs

381.2

N3

Manpower costs

9.8

N4

Finance costs

5.0

939.5

N5Cash surplus

809.3

N1 -- This is not typical SCHS project. This project was originally a flat-for-sales-scheme. Land cost was not high because th eland premium was paid iin 1993. This project was subsquently changed to become a SCHS project.
N2 -- Building costs include foundation expenses, consultancy fees, superstructure expenses and other construction costs.
N3 -- Manpower costs include all staff costs directly identifiable to the project from the time this project was converted to become a SCHS project. Staff cost incurred prior too that was not included and was absorbed by the HKHS.
N4 -- The HKHS financed most of the funds required for this project from internal funds and therefore finance costs were low.
N5 -- All cash surplus has been reinvested to finance other SCH projects.


Annex C

Selection of Consultants for Sandwich Class Housing Scheme Projects

The Hong Kong Housing Society (HKHS) maintains an approved list of consultants for consultancy services covering architectural, structural engineering, building services engineering and quantity surveying.

  1. HKHS reviews and updates the list annually. Consultants not on the list but who are keen to provide services to the HKHS can register their interest with the HKHS in writing. The HKHS will evaluate such consultants' capability, area of specialisation, expertise, number of professional and non-professional staff, their experience, client reference and performance track record.
  2. The HKHS allocates jobs among the consultants on the approved list on an equitable basis. In considering the appointment of consultants for a particular project, the HKHS will take into consideration factors such as resources available at the time of selection, their current commitment with the HKHS, their current overall workload and previous performance (if appropriate).
  3. All members of HKHS Executive Committee and sub-committees shall declare their interest in writing annually. During a meeting where a subject is discussed which could give rise to a conflict of interest, the concerned member will have to make an oral declaration and cannot vote on that item.
  4. The Independent Commission Against Corruption has endorsed the procedures followed by the HKHS in the selection of consultants for new projects.

Annex D

Sandwich Class Housing (SCH) Scheme Response to Questions raised by a member of the Housing Panel

Question 1:

Has the Sino-British Land Commission promised to grant the 11 sites (details as per Enclosure 1 to Annex A) for construction of Sandwich Class Housing flats?

Answer 1:

The Sino-British Land Commission approved all the 11 sites granted to the Hong Kong Housing Society (HKHS) for the construction of the first batch of 10,000 SCH flats.

Question 2:

Has the Government requested for allocation of fund from the Legislative Council to cover the expenses in this respect for 1997-98, 1998-99 or thereafter?

Answer 2:

This paper is to seek Members' approval to increase the existing approved commitment from $7 billion by $6.9 billion to $13.9 billion to provide sufficient additional funding for a loan to the HKHS for the repayment of land premia for the second batch of SCH sites.

As we have explained in the Housing Panel meeting held on 3 July 1996, the HKHS can only draw down the loan, on a site by site basis, to pay for the premia for land required to build the second batch of 10,000 SCH units. The HKHS cannot draw down the loan for other purposes.

After approval, based on current projections, HKHS will draw $2.41 billion, $2.88 billion and $1.8 billion each year in the three years from 1996-97 to 1998-99 respectively. We will include the estimated amount of land premia payable for each financial year in the Loan Fund annual Estimates to be presented to the Legislative Council.

This is similar to the procedure adopted for the approval of project expenditure under the Capital Works Reserve Fund. We adopted the same mechanism in the first loan to HKHS to pay for the land premia of the first batch of SCH sites.

Question 3:

Please indicate in the information paper the percentage of market rate (100% or 50%) at which land premium is charged by the Government on land sold to the Housing Society.

Answer 3:

For all SCH project sites, Government charges the HKHS 50% of the market value of the site as land premium.

Question 4:

Apart from the British system (using square feet), is it possible to include measurements in metric system (using square metres) also in the information paper?

Answer 4:

Please see Annex B of the paper.

Question 5:

If loan fund is only allocated to the Housing Society by the Finance Committee on an annual basis for land purchasing, what will be the respective amounts of fund requested by the Housing Society for 1996-97, 1997-98, 1998-99, 1999-2000 and thereafter?

Answer 5:

The HKHS will draw down the loan as per Answer 2 for the construction of the second batch of 10 000 SCH units.

There are planning issues to be resolved on some of the potential sites. The Administration is taking vigorous action to resolve them. However, the estimated loan amount can only be taken as reference. This is because the Administration may need to identify replacement sites where necessary, in which case, both the quantum and timing of payments could be changed. It is therefore undesirable to consider allocation of loan funding on an annual basis for the HKHS to pay the land premia in respect of the second batch of SCH.

As regards possible loan requirements in 1999-2000, 1 space suitable sites for the third batch of SCH flats are still being identified. This being the case, neither the loan requirement nor the draw down schedule can be determined at this stage. Indeed, the need for a loan will have to be considered then in the light of the financial strength of the HKHS.

Housing Branch
July 1996


Last Updated on 2 December 1998