For discussion on
27 February 1998

Provisional Legislative Council
Panel on Planning, Lands and Works

Proposal for Setting up the Building Safety Improvement Loan Scheme


The purpose of this paper is to brief Members on our proposal to seek the approval of Finance Committee to provide $500 million from the Loan Fund to start the Building Safety Improvement Loan Scheme (the Loan Scheme).


2. We propose to set up the Loan Scheme which will offer loans to owners of domestic and domestic/commercial buildings who need financial assistance to participate in the Building Safety Inspection Scheme (BSIS).

3. At present, section 26A of the Buildings Ordinance provides that where, on inspection, the Building Authority (i.e. the Director of Buildings (D of B)) finds any dilapidation or defect in a building, he may by order require the owner of the building to carry out detailed investigation and/or remedial works. Should the owner fail to do so, the D of B will carry out the investigation/works and recover the costs from the owner.

4. The D of B now intends to step up actions on buildings aged 30 years or above which show signs of dilapidation or defect and, at the same time, encourage owners of these buildings to participate on a voluntary basis in the BSIS. D of B will carry out a general appraisal on the conditions of the buildings to assess whether orders under section 26A of the Buildings Ordinance need to be issued. When such orders need to be issued for buildings found to be in defect, the D of B will invite owners of these buildings to participate in the BSIS, i.e. to undertake inspections and carry out maintenance, repair and improvement works to meet building safety standards in respect of structural stability, integrity of external finishes, and fire safety.

5. The setting up of the Loan Scheme is one of the commitments made by the Chief Executive in his Policy Address given on 8 October 1997 to improve building safety. It will serve as an incentive to encourage owners to participate voluntarily in the BSIS. The loans will cover the costs of inspections and works as required under BSIS, as follows -

  1. works pertaining to the improvement of the structural stability of the building;

  2. works pertaining to the improvement of the integrity of external finishes of the building;

  3. works pertaining to the improvement of the fire safety aspects of the building;

  4. any incidental or consequential works related to (a), (b) or (c) above; and

  5. inspection work and related professional services.

6. The prime candidates of the loans are owners of buildings aged 30 years or above showing signs of dilapidation or defect. The D of B will invite owners of these buildings to participate in the BSIS and apply from the Loan Scheme, although owners of other buildings may also apply on their own initiative.

7. The D of B will be responsible for administering the Loan Scheme, with advice from an advisory committee comprising both official and non-official members.

8. Recipients of loans will pay interest on the outstanding balance of their loans at a rate determined on the principle that there should be no gain and no loss to the Government. The D of B may, on the advice of the advisory committee, grant interest-free loans or loans at a concessionary interest rate for special cases where owners are in particular financial hardship, e.g. elderly singletons with little savings and who rely on renting out their flats for a living.

9. Recipients of loans will have to repay the loan by 36 equal monthly instalments.


10. It is estimated that in 10 years’ time, more than 40% (about 260,000 units) of the private housing stock in the urban area will be over 30 years old and reaching obsolescence, compared with 20% (about 113,000 units) today. This problem is compounded by the poor maintenance of many of these buildings, causing serious dilapidation and structural defects which will pose a safety hazard to the general public. Regular maintenance and improvement works will prevent dilapidation and, at the same time, extend the habitable life of the buildings and defer the need for them to be redeveloped, thus alleviating the pressure on urban renewal.

11. We have approached the Hong Kong Association of Banks in early July 1997 to gauge their initial views on the possibility of providing a similar loan scheme to assist owners for carrying out the inspection and subsequent improvement works to their buildings. Their response had not been promising, signifying that commercial sources of financing are unlikely to be forthcoming to willing owners.

12. The "no-gain, no-loss" interest rate is the return achieved by the entire Exchange Fund over a period of 18 months on a time weighted average basis. There is therefore no subsidy element in granting the loans.


13. We will draw down the fund in mid-1998 and the projected financial requirement over a 10-year period is at Appendix I. The projection is based on the assumption that 30% of owners of buildings showing signs of structural defects that had been invited to take part in BSIS will apply for loans to undertake inspections and carry out improvement works and that some voluntary participants from other buildings will also apply for the loans on their own initiative.

14. We will conduct a review after the first year, based on the actual response to the Loan Scheme, to assess the funding requirement for subsequent years. If necessary, an application to increase the commitment would be submitted as and when appropriate.

15. The Buildings Department intends to redeploy existing staff and create new posts to cope with the requirement in 1998-99.

Planning, Environment and Lands Bureau
February 1998