Hong Kong launches a five-year pilot scheme for an additional plot ratio to optimize the old building redevelopment mechanism.

To align with the launch of the "Extra Plot Ratio Pilot Scheme" (Pilot Scheme) in September, the Planning Department, Lands Department, and Buildings Department under the Hong Kong Development Bureau issued a joint operational memorandum today (August 19). This memorandum details the requirements and arrangements of the Pilot Scheme. The Pilot Scheme will last for five years, starting from September 1, 2026, to August 31, 2031, with the time frame established primarily to encourage the market to seize opportunities to push forward redevelopment projects. During this five-year period, the Lands Department will accept applications from developers for contract amendments regarding eligible redevelopment sites under the Pilot Scheme, imposing contractual conditions, including the addition of redevelopment deadlines and penalties, to ensure that developers implement redevelopment plans on schedule. Following the introduction of the Pilot Scheme, the Hong Kong Development Bureau will assess its effectiveness in a timely manner and make detailed adjustments as needed, considering market responses, including whether to extend the duration of the Pilot Scheme. The Secretary for Development, Ning Hanhao, stated: The Pilot Scheme is another initiative to promote private redevelopment projects in old districts, following the amendment of legislation to lower auction thresholds over a year ago, embodying the current government's innovative and proactive policy thinking. To concentrate market resources on driving the redevelopment of old districts, the Pilot Scheme will be implemented first in seven old districts (note). Private redevelopment sites located in these seven old districts and meeting other requirements of the Pilot Scheme can receive an additional 20% plot ratio to enhance the financial viability of redevelopment projects. She continued: Data from the past decade shows that about 20% of newly built residential units from redevelopment projects come from the Urban Renewal Authority (URA), while the remaining 80% come from private development projects, demonstrating the crucial role of the private market in the redevelopment of old buildings. However, due to the acquisition costs involved in old district redevelopment and certain constraints concerning development parameters in already developed areas, market participation has yet to become active. With over 500 buildings aged 50 years or older added each year, and an average increase of over 700 buildings expected annually over the next 15 years, it is imperative that we adopt innovative and bold policies to drive the market to redevelop, addressing the situation where the aging of buildings outpaces the redevelopment progress of both the URA and the private market, in order to achieve the policy goals of addressing the risks associated with old buildings and improving living environments. We are pleased to see broad societal and industry support for this policy measure. In finalizing the implementation details and formulating the joint operational memorandum, the Hong Kong Development Bureau and the three departments took into account the feedback received during the two-month consultation period at the end of last year and held further discussions with key stakeholders. The joint operational memorandum outlines the scope, application criteria and conditions, as well as the application deadlines of the Pilot Scheme, enabling developers to clearly understand the practical operations and apply as early as possible. Under the Pilot Scheme, developers who commit to demolish residential buildings that are 50 years or older, located in the seven old districts, and with a site area of no less than 700 square meters, and rebuild them for residential use will be provided an additional 20% of the gross floor area exempt from land premium as an incentive. Developers can choose: (i) to submit a planning application to the Town Planning Board (TPB) to propose increasing the total floor area that can be built on the original site by up to 20%. If approved, the additional plot ratio will be considered exempt from land premium (the specific implementation arrangement calculates the land premium value of the additional 20% plot ratio at standard amounts, offsetting the land premium amount of the original site redevelopment project); or (ii) if they decide not to increase the total floor area by up to 20% on the original site for rebuilding, the additional plot ratio can be converted into land premium value, which can be used to offset the land premium the developer has to pay for the original site redevelopment project, or for any land transaction conducted by the developer in the Northern Metropolis and other areas throughout Hong Kong, including bidding, contract amendments, or land exchange projects. The effective usage period for the land premium amount is ten years, during which it will not earn any interest and cannot be transferred in the market. The Hong Kong government will not pay any redemption, compensation, or similar payments for any unused amounts after the ten-year limit expires. In addition to providing two options for developers to choose from based on their circumstances, the Pilot Scheme also introduces two arrangements to facilitate applications and streamline procedures. First, before submitting an application, developers can make preliminary inquiries to the Lands Department and Planning Department about whether their redevelopment sites meet the necessary criteria, the land premium value of the additional plot ratio, and planning matters. Second, the Lands Department will calculate the land premium value of the additional plot ratio using standard amounts. The department also issued Operational Memorandum No. 9/2026 today, establishing applicable standard amounts for each of the seven old districts, which were determined based on a basket of market-related data.