For discussion
on 21 February 1997


Hong Kong Housing Society New Subhead "Sandwich Class Housing Loan Scheme"
Subhead 988 Payment to the Loan Fund

Members are invited to approve -

(a) the creation of a new subhead "Sandwich Class Housing Loan Scheme" under Head 251 Housing with a commitment of $1.38 billion to provide the Hong Kong Housing Society with funds to make loans under the extended Sandwich Class Housing Loan Scheme; and

(b) supplementary provision of $500 million for Head l84 Transfers to Funds Subhead 988 Payment to the Loan Fund.


On 16 July 1993, we granted $2 billion to the Hong Kong Housing Society (HKHS) to launch the Sandwich Class Housing Loan Scheme (SCHLS). Five phases of the SCHLS have been implemented. The scheme has been popular, and the quotas have on average been more than three times oversubscribed. We have received repeated calls from the community to make further efforts to assist sandwich class families to acquire their own homes.


2. We propose to provide a sum of $1.38 billion from the Loan Fund to the HKHS to extend the SCHLS. Under this extended scheme, the HKHS will continue to act as an implementation agent for the Government in providing beneficiaries with one-off, up-front loans towards meeting the down-payments and related home purchasing expenses. The terms and conditions of these loans will be the same as for those under the original SCHLS. Beneficiaries will have to repay the loans to the HKHS in 120 equal instalments, starting from the fourth year after draw down. The purpose of this grace period is to allow beneficiaries to improve their financial position before starting repayments. The HKHS and beneficiaries will enter into agreements which set out the terms of the loans, and the HKHS will secure the loans by second legal charges in its favour.

3. Beneficiaries will pay interest at 2% a year on the outstanding balance of their loans. To commit beneficiaries financially to the purchases, they will be required to make a down-payment of at least 5% of the purchase price.

4. The HKHS will set up a fund separate from its other accounts. HKHS will use money from the fund for the extended scheme only. HKHS may invest monies which are not required for use by the scheme for the time being in bank deposits, commercial paper or other low-risk investment instruments according to investment guidelines issued by the Hong Kong Monetary Authority from time to time. All investment income will accrue to the fund.

5. The HKHS will draw from the fund its reasonable expenses necessary for administering the scheme, as agreed with the Government. The HKHS will furnish the Government with quarterly reports on, inter alia, the state of the fund, the number of beneficiaries drawing loans, repayments of principal, payment of interest and investments made, and investment performance. An independent auditor will conduct an annual audit on the detailed accounts of the fund. The HKHS will have to repay to the Government all sums received during a financial year, by way of repayment or recovery of loans, less any reasonable expenses which it has incurred in implementing the extended scheme, within two months after the end of that financial year. The Government may also require the HKHS to return any unexpended balance in the fund by giving reasonable notice.

6. We will require the HKHS to enter into an agreement which set out the financial arrangements for and the details of the implementation of the extended scheme. In line with the practice for the existing scheme, the HKHS will be responsible for inviting and processing applications according to the eligibility criteria set out at Enclosure 1. In order to make this task more manageable, all applications will be subject to a preliminary ballot in which the HKHS will shortlist a number of applications.Encl.1

7. The Government will have the right, under the agreement with the HKHS, to revise from time to time details of the scheme in the light of changing circumstances.


8. We implemented the SCHLS originally to meet demand from sandwich class families for home ownership, pending completion of sufficient flats under the Sandwich Class Housing Main Scheme. While we are on target in meeting our pledge of building 24 000 flats by 2001 and a further 6 000 flats by 2003, it is clear that demand for this category of subsidised home ownership continues to exceed supply. We will continue to look for new sites. However, taking into account the lead time for construction, we propose to extend the SCHLS to benefit an additional 3 000 sandwich class families in the short term.

9. The major problem for many prospective first time home buyers is saving for the initial down-payments. Providing loans to them to help them meet the down-payments goes a long way towards assisting them to buy their own homes. In addition, a low interest subsidy helps to relieve the heavy burden of mortgage repayments, since the interest element usually accounts for the greater proportion of repayment in the initial years of a mortgage loan.


10. The proposed loan is a one-off commitment. There are no recurrent implications. Based on the latest balance of the Loan Fund which stood at $2,689 million as at 31 December 1996 and the anticipated cashflow of the Loan Fund for the remaining part of the current financial year, we propose supplementary provision of $500 million for Head 184 Transfers to Funds Subhead 988 Payment to the Loan Fund. Subject to Members’ approval, we shall offset the supplementary provision of $500 million by deleting an equivalent amount under Subhead 984 Payment to Capital Works Reserve Fund (General Purpose) of the same Head.


11. The HKHS was established in 1948 and incorporated under the Hong Kong Housing Society Ordinance in 1951. The Society plays a major role in supplementing the housing development programmes of the Hong Kong Housing Authority, particularly in providing adequate and affordable housing to selected target groups.

12. We launched the Sandwich Class Housing Main Scheme in 1993 to address public concern about the difficulty faced by sandwich class households in buying their own homes. Under the scheme, the Government provides land to the HKHS at 50% of full market value of land premium to build flats for sale to sandwich class households at affordable prices.

13. To provide immediate relief before the completion of flats under the main scheme, we introduced the SCHLS in 1993 with an initial grant from the Government of $2 billion. Under the scheme, the HKHS granted beneficiaries one-off, low interest loans towards meeting down-payments and related expenses. The HKHS has launched a total of five phases of the SCHLS. The HKHS has completed the first four phases of the SCHLS and have assisted 4 049 families to purchase flats in the private sector. In January 1997, the HKHS received over 4 800 further applications for 500 loans available under Phase V of the scheme. Upon completion of Phase V, the HKHS will have fully utilised the grant of $2 billion. A table summarising the main features of the five phases is at Enclosure 2.Encl.2

Housing Branch
February 1997

Enclosure 1 to FCR(96-97)109

Sandwich Class Housing Loan Scheme
Eligibility Criteria

1. The family should comprise at least two directly related members including the applicant and all family members included in the application must be residing in Hong Kong. (Note I)

2. Total family income must be between HK$26,001 and HK$60,000 per month with the applicant being the major income earner. (Note II)

3. All family members included in the application must not have owned any residential properties in Hong Kong in any form or manner directly or indirectly within a period of 24 months prior to the date of submitting the application and during the process of the application. (In case of any uncertainties or disputes, the Hong Kong Housing Society’s decision shall be final and conclusive.) (Note III)

4. The applicant must be aged 18 or over having resided in Hong Kong for seven or more years, and he/she must either have the right of abode in Hong Kong or is holding a Hong Kong Identity Card having stay in Hong Kong not limited by the Hong Kong Immigration Department. (Note IV)

5. The family should not own total disposable assets of more than HK$1 million. (Note V)

6. All family members included in the application must not be authorised tenants/occupants of public housing units or Home Ownership Scheme units nor have they enjoyed/been enjoying home purchase assistance offered by the Government. (Note VI)


(i) Directly related members include only the spouse (Marriage Certificate must be produced), natural children or legally adopted children, parent and/or siblings of the applicant or his/her spouse.

(ii) Families consisting of single parents must produce evidence of final divorce documents with legal custody of children or a death certificate of spouse. Otherwise the spouse and all children must be included in the application.

(iii) For applicants belonging to family composition of 2nd priority as shown below, evidence of final divorce documents of the applicant’s parents or death certificate of the other parent must be produced (if only one parent of the applicant is included in the application).

(iv) If the applicant’s sibling included in the application is under 18 years old, the parents of the sibling must be included in the application.

(v) Consideration will only be given to the following family compositions. Their priorities are:


Family Composition


Applicant + spouse and/or child(ren)


Applicant + parent(s)


Applicant + sibling(s)


(i) The applicant and all working family members included in the application must produce certificates from their employers on income from their current employment.

(ii) The applicant and all income earning family members must produce tax returns and/or tax demand notes for the previous year or other documents acceptable to the Hong Kong Housing Society.

(iii) For computation of family income, the following will be included:

(a) All income before tax including current salaries and wages, regular or temporary bonuses, commissions, pensions and all types of allowances except old age allowances and disability allowances from the Comprehensive Social Security Assistance Scheme. Current salaries and wages, regular or temporary bonuses, commissions, allowances and pensions respectively mean the amounts earned from the current employment at the time of assessment.

(b) All gross income derived from all landed properties, in Hong Kong or overseas, vehicles or operating business owned by the applicant and any of the family members included in the application, before deduction of mortgage payments, taxes and other outgoings.

(c) For irregular income or the irregular portion of total income, the average of the previous 12 months of current employment will be taken.

(d) For person(s) operating any business or holding any shares of companies (excluding shares of listed companies), evidence of income before taxation of the previous year in the form of audited accounts prepared by an independent Certified Public Accountant and tax demand notes must also be produced for assessment.


(i) Properties held by private companies solely or partly owned by the applicant or any of the family members included in his/her application will be considered as owned by the applicant or that family member.

(ii) Examples of having an interest in residential properties -

(a) having entered into a binding agreement for sale and purchase to purchase a residential unit; or

(b) beneficiary of an estate of a deceased person which includes a residential unit; or

(c) own a residential property which is subject to a binding agreement for sale and purchase; or

(d) having entered into a binding agreement for sale and purchase to purchase shares in a company which owns residential unit(s) in Hong Kong.

(iii) Examples in (ii) above are given as illustrations only and are not intended to be exhaustive.

(iv) Applicant and his/her family members must fully disclose details of all properties (residential or non-residential in Hong Kong or overseas) which is/are held by the applicant or his/her family members either in his/her/their own name(s) or through a company (excluding listed companies in Hong Kong) in which he/she/they hold shares or through the business which he/she/they operate whether as trustee or as personal representative or in any other capacity whatsoever within a period of 24 months prior to the date of submitting the application and during the process of the application.


Length of residence will be taken as evidenced by the relevant information on the identity card of the applicant or information from the Immigration Department records.


The applicant and each family member included in the application are required to declare the total assets whether in Hong Kong or overseas in his/her possession in the form of landed properties including both residential and non-residential properties at current market value (after deducting outstanding mortgage amount, if any), land including lease agreements and Letters A or B entitlements, stocks and shares at current value, vehicles including private and commercial vehicles, transferable vehicle licenses including taxi and public light bus licenses, bank deposits, unit trust funds and for those engaged in business, all categories of asset owned by the companies operating such business. The applicant and each family member included in the application will also be required to declare full details of all properties which are being held or were held by them in the capacity of trustee or in any capacity whatsoever.


The following categories of persons are not eligible to apply:

(i) Persons included in the tenants’ register or tenancy agreement of public housing estates, temporary housing area and cottage area of Hong Kong Housing Authority, Hong Kong Housing Society, Hong Kong Settlers Housing Corporation Limited.

(ii) Persons included in the tenants’ register (including ex-owners) of Hong Kong Housing Authority’s Home Ownership Scheme, Private Sector Participation Scheme, middle income family housing estate Melody Garden, Home Purchase Loan Scheme, Hong Kong Housing Society’s Flat-for-Sale Scheme, Sandwich Class Housing Loan Scheme, Sandwich Class Housing Scheme.

(iii) Persons who have already received or are receiving benefit under government home purchase assistance schemes.

Phase I

Phase II

Phase III

Phase IV

Phase V

Income eligibility


per month)

HK$20,001 -


HK$22,001 -


HK$25,001 -


HK$26,001 -


Maximum loan amount



Application period

28/08/93 - 03/09/93

20/04/94 - 03/05/94

25/10/94 - 08/11/94

17/08/95 - 31/08/95

30/12/96 - 13/01/97


1 000

1 500

1 500

1 500


Forms received

3 435

4 756

3 658

2 990

4 800

Certificates granted


1 568

1 538

1 718

Number of applicants who purchased units


1 143

1 133

1 385

Average subsidised loan





Number and total amount of loans drawn down



1 143


1 133


1 384


Last Updated on 5 August 1999