For information
on 7 September 1998

Legislative Council Panel on Housing

Information Note on Sandwich Class Housing Scheme


This paper informs Members the new alternative payment method introduced by the Housing Society (HS) to the flat purchasers of Sandwich Class Housing Scheme (SCHS).


2. The Government has pledged to build a total of 50,000 flats by 2005 under the Sandwich Class Housing Scheme (SCHS), for which the Housing Society (HS) is the implementing agent. So far two projects (1,906 flats) have been completed and seven projects (6,265 flats) pre-sold.

3. Some purchasers of the seven pre-sold projects, one of which will be completed shortly in August and others are due for completion in the latter half of 1998/early-1999, experienced difficulty in obtaining mortgage loans as a result of downturn of the property market in recent months. In March, HS introduced a package to assist the purchasers of Sandwich Class Housing flats in question - including a three-year interest subsidy and sharing part of the banks' risks in default cases within the first five years. These purchasers have recently demanded additional financial assistance from the HS, which includes flexible discount rates, reduction of purchase price and full buy-back guarantee by the HS. The HS has declined these demands after careful consideration of the respective policy, legal and financial implications.

Alternative Payment Method

4. In view of the financial difficulties of some purchasers, the HS has introduced on August 7 an alternative payment method for purchasers. Purchasers of the seven projects now have the option to choose between the three-year interest subsidy and a second charge loan of not more than 20% of the original purchase price, with a repayment grace-period for five years which is interest-free. The purchasers will be required to start repayment at prime rate as from the sixth year by a maximum of 180 monthly instalments. The financial implication of the new option for the HS is estimated to be similar to that of the three-year interest subsidy already offered to the purchasers.

5. The alternative payment arrangement would provide sufficient assistance for purchasers who wish to complete their purchase. The HS is making use of its own funds to implement the arrangements which would not have serious implications on its financial position.

6. In so doing, the HS has struck a good balance between prudence in the management of its finance and providing flexible payment methods for the purchasers. The Government respects the HS's decision.

Housing Bureau
Government Secretariat
August 1998