TNAG-0806-FCO40-1011-Policy-of-Government-of-Hong-Kong-on-land-in-the-New-Territo-1979 — Page 6

If the assumption that 60% will take letters B under the new system is high, the Government's initial expenditure will be raised accordingly;

the rate of resumption, which is assumed to be 23 million square feet in the remainder of 1978/79, 15 million in 1979/80 and in 1980/81 and 10 million a year thereafter and is dictated by the Government's development programmes;

movements in land prices leading to changes in the unit rate for cash compensation.

As explained in paragraph 6(c) above the present system has in effect resulted in the Government having incurred heavy loan costs. If the Working Group's proposals are accepted, the future exchange commitment will immediately be reduced by half as a result of land- owners being offered letters B in respect of half their land only. The commitment will be reduced further if, as estimated by the Secretary for the New Territories, 40 per cent of landowners will accept the cash alternative instead of letters B. As a result, the gap between the date land is resumed and the date land is offered in exchange will be reduced, as will the difference between premia realised on letter B exchanges and full market value, until the point is reached where land can be offered in exchange for letters B in the same year that those letters are issued. Thereafter, the cost of implementing the proposal will start to be recovered as a result of full market value being achieved for land that would otherwise have had to be reserved for letter B exchanges.

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However, the rate at which expenditure will be recouped

depends on the assumptions made regarding:

(a)

the rate at which land can be made available for letter B exchanges.

This affects the rate at which the present gap between resumption and exchange can be narrowed. The narrower the gap, the less the risk that the Government will forgo revenue on a rising market (see paragraphs 6(c) and 12). The present assumption is that by 1984/85 enough land can be made available to enable letters B to be exchanged within 12 months of the time at which they are issued;

CONFIDENTIAL #E