TNAG-0669-FCO40-818-Policy-on-housing-and-resettlement-in-Hong-Kong-1977 — Page 93

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CONFIDENTIAL

XCC(77)11

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(c) at present the Housing Authority makes a surplus on

Group A estates and has inherited a cash deficit on Group B estates, such deficit being covered by grants from general reserve. As the surplus is insufficient to meet cash requirements on capital account, the Authority borrows from the Development Loan Fund, both in order to pay land premia and to meet its net cash requirements for building new estates. The Authority is not required to repay these loans, but rent includes an element for loan recovery over 40 years; and

(d) land premium is paid to Government and calculated

at 1/3rd of the full market value, less formation

costs.

Although the Housing Authority has paid the interest on outstand- ing loans, it is and is likely to continue to be, quite unable to discharge the remaining indebtedness listed above should it be called upon to do so. Also, as Honourable Members have pointed out, the above arrangements and their presentation do not show the full extent of Government's con- tribution to the Housing Authority.

Proposals

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In order to provide Housing Authority with a sound financial structure, on the one hand, and to show Government's full contribution, on the other, it is proposed to deal with each element of Government's contribution in the following manner from 1st April 1976 onwards:

(a) Land - land on which Housing Authority estates are built,

including former Resettlement and GLCH estates, (but excluding the land for which the Housing Authority has already paid a premium), will be regarded as a Govern- ment contribution. Land values will be derived from rateable values, by the residual method of valuation described in Annex B. A limited exercise on this basis indicates that land values will range between $100 and $200 per square foot depending on location etc. In respect of land for which the Authority has paid a premium of one third of the market value, less forma- tion costs, the Government's contribution will be shown by way of a land value assessed at two-thirds of the

market value at the time of the grant of the land i, e. the subsidy provided in the past.

CONFIDENTIAL

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