# Understanding Hong Kong’s new land premium policy

- **Source:** Real Estate Asia
- **Published:** 2026-07-20T01:00:00.000Z
- **Author:** Staff Reporter
- **Original:** https://realestateasia.com/commentary/understanding-hong-kongs-new-land-premium-policy
- **Topics:** Government & Policy, Regional Markets

## Featured rationale

Deferred premiums may lower developers' initial financing burden and align construction with demand, but the 60% threshold could limit uptake and broader supply effects.

## AI summary

Hong Kong's three-year “Pay for What You Build” pilot, effective 1 June 2026, permits phased non-residential development but requires an initial 60% GFA commitment.

## Original article

The Scheme is likely to have a selective impact, rather than a broad catalyst for non-residential development.

The Lands Department has introduced a three-year pilot scheme on “Pay for What You Build” (the Scheme), effective from 1 June 2026. The Scheme applies to lease modification and land exchange applications for non-residential developments.

Applicants must undertake an Initial Phase comprising at least 60% of the permissible gross floor area (GFA) of the whole development, to be completed in time in accordance with the building covenant. The land premium is assessed on the market value of GFA attributable to the Initial Phase and the "preferred use" of the land proposed by lot owners.

The remaining development potential may be realised through another lease modification within 10 years following completion of the Initial Phase, with premiums assessed at prevailing full market value. Any unutilised development capacity after the 10-year period may be redeployed to elsewhere by the Government.

The Northern Metropolis and policy intent As highlighted in the 2025 Policy Address, the Scheme is linked to the Northern Metropolis. Many planned economic clusters in the Northern Metropolis, particularly industrial and innovation and technology hubs such as the San Tin Technopole, face uncertain and evolving occupier demand. This is further compounded by high vacancy rates and substantial new office supply in urban areas.

Demand uncertainty is further evidenced by the limited number of land exchange and lease modification cases for non-residential uses. According to the Lands Department, only eight non-residential cases were completed between January 2025 and May 2026, excluding technical modifications involving nil premium. Most involved land premiums below $10m, suggesting a cautious investment environment.

Under the conventional land premium assessment mechanism, premiums are assessed based on the maximum permissible GFA and the highest market value as assumed by the Lands Department. Whilst suitable for mature districts, this approach may overstate land value in emerging locations where demand is expected to materialise gradually.

This creates a mismatch between substantial upfront premium payments and uncertain future income streams. High financing costs further increase project risk and may discourage developers from proceeding with investment.

Against this backdrop, the Scheme seeks to recalibrate the risk-sharing framework between the Government and developers. By deferring part of land premium payments, it reduces initial capital commitments, borrowing requirements, and associated interest costs.

The Scheme also facilitates a phased development approach, allowing developers to align construction with actual market demand. This provides flexibility to test tenant uptake before committing to full build-out, mitigating demand uncertainty intrinsic to new economic zones.

Developers may also retain the option not to proceed with the remaining development if market conditions remain weak, avoiding over-commitment of capital, and penalty for breach of the building covenant under lease. These features are intended to incentivise earlier project commencement and enhance market responsiveness in the Northern Metropolis.

Case study – URA option scheme in SingaporeA comparable reference case is Singapore’s Urban Redevelopment Authority (URA) option scheme, first introduced in 2004 for the Marina Bay Financial Centre (MBFC) site. The project comprised approximately 438,000 square metres of mixed-use GFA and formed part of the planned extension of Singapore’s Central Business District. As a reclaimed site, it faced significant uncertainty over future demand.

Under the option scheme, the developer was required to commit initially to at least 100,000 sq. m. of GFA, which is approximately 23% of the total GFA. The developer will purchase an option for the right to acquire subsequent phases at prices fixed by a formula linked partly to market indicators based on the tender bid for the initial phase. The developer has a choice of option periods of six, eight, and 10 years, subject to the payment of corresponding option fees.

This framework shares conceptual similarities with the “Pay for What You Build” approach.

Both aim to address demand uncertainty and high upfront capital requirements by facilitating phased development and deferring financial commitments. In both cases, the Government shares part of the market risk, enabling developers to align investment more closely with actual demand. The Singapore scheme has been widely regarded as successful, facilitating the establishment of Marina Bay as a major extension of Singapore’s CBD.

A key difference lies in the treatment of future land pricing.

Hong Kong assesses premiums for later phases based on prevailing market conditions at the time of subsequent lease modification. In contrast, the Singapore model provides a partially pre-agreed pricing mechanism through its formula-based adjustment. This will provide the developer with some certainty in the price for the subsequent phases and allow the Government and the developer to share the risk of land price volatility.

In short, the Hong Kong approach places greater exposure on developers to future price fluctuations.

Policy considerations Despite its merits, the Scheme may achieve only limited market uptake in the near term given continuing uncertainty over occupier demand in the Northern Metropolis.

First, the requirement for developers to commit at least 60% of the maximum permissible GFA substantially weakens the extent of phased development. In typical urban redevelopment scenarios, where sites are relatively small and projects are often undertaken in a single phase, this threshold necessitates a near full-scale upfront commitment. As a result, the Scheme may offer only modest cash-flow benefits rather than fundamentally altering development risk.

In contrast, large-scale sites within New Development Areas involve significant upfront investment, longer absorption horizons, and heightened demand uncertainty. The requirement to undertake at least 60% of total GFA in the Initial Phase remains substantial relative to demand, particularly in the context of large-scale land supply in the Northern Metropolis. A lower threshold, potentially 20% to 30% of total GFA for some designated areas in the Northern Metropolis, could better accommodate phased development and improve feasibility.

A further issue is the Scheme’s practical applicability. Land within NDAs is now primarily supplied through government land sales, whilst many developers have shown a preference for accepting ex-gratia compensation under government land resumption rather than pursuing lease modifications or land exchanges.

Taken together, the Scheme is likely to have a selective and case-specific impact, rather than serving as a broad-based catalyst for non-residential development. Its success will depend less on the ability to defer land premiums and more on whether it addresses the underlying mismatch between development scale, market demand and investment timing.

## Chinese translation

> Translation model: grok

### 解读香港新土地补价政策

该计划更可能产生选择性影响，而非成为非住宅发展的广泛催化剂。

该计划更可能产生选择性影响，而非成为非住宅发展的广泛催化剂。

地政总署推出为期三年的“按建缴付”（Pay for What You Build）试点计划（下称“计划”），自2026年6月1日起生效。计划适用于非住宅发展的契约修订及换地申请。

申请人必须承诺实施“初始阶段”，其建筑面积（GFA）至少占整个发展项目准许总建筑面积的60%，并须按建筑契约如期完成。土地补价按初始阶段可归属于该阶段的GFA市值，以及地段业主提出的土地“优选用途”进行评估。

剩余发展潜力可在初始阶段竣工后10年内，通过另一次契约修订予以实现，补价按当时全面市值评估。10年期后任何未使用的发展容量，可由政府另行调配他用。

北部都会区与政策意图 正如2025年《施政报告》所强调，该计划与北部都会区相关。北部都会区许多规划中的经济集群——尤其是工业及创新科技枢纽，如新田科技城——面临不确定且不断演变的租户需求。市区高空置率及大量新增写字楼供应，进一步加剧这一局面。

需求不确定性亦体现在非住宅用途的换地及契约修订个案数量有限。据地政总署，2025年1月至2026年5月期间，仅完成八宗非住宅个案（不含补价为零的技术性修订）。多数涉及的土地补价低于1,000万港元，显示投资环境审慎。

在传统土地补价评估机制下，补价按最高准许GFA及地政总署假定的最高市值评估。此做法虽适合成熟地区，但在需求预期将逐步显现的新兴地段，可能高估土地价值。

这造成高额前期补价与不确定未来收入流之间的错配。高融资成本进一步抬升项目风险，或令发展商却步。

在此背景下，计划旨在重新校准政府与发展商之间的风险分担框架。通过递延部分土地补价，降低初期资本投入、借贷需求及相关利息成本。

计划亦便利分期开发，使发展商可将建设与实际市场需求对齐。这提供了在全面建成前测试租户吸纳情况的灵活性，从而缓解新经济区固有的需求不确定性。

若市况持续疲弱，发展商亦可选择不推进余下发展，避免过度投入资本，以及因违反建筑契约而受罚。上述特点旨在激励项目更早启动，并提升北部都会区的市场响应能力。

案例研究——新加坡市区重建局（URA）期权计划 可资参照的是新加坡市区重建局（URA）期权计划，该计划于2004年首次引入滨海湾金融中心（MBFC）地段。项目混合用途总建筑面积约438,000平方米，属于新加坡中央商务区（CBD）规划扩展的一部分。作为填海地段，其对未来需求面临显著不确定性。

在期权计划下，发展商最初须承诺至少100,000平方米GFA，约占全部GFA的23%。发展商将购买期权，以按与首期招标出价挂钩、部分参考市场指标的公式所确定的价格，取得后续阶段。发展商可选择6年、8年及10年的期权期限，并须支付相应期权费。

这一框架与“按建缴付”在概念上具有相似性。

两者均旨在通过便利分期开发、递延财务承诺，应对需求不确定性与高额前期资本要求。在两种情况下，政府均分担部分市场风险，使发展商能更紧密地按实际需求配置投资。新加坡计划被广泛视为成功，推动滨海湾成为新加坡CBD的重要延伸。

关键差异在于未来土地定价的处理方式。

香港对后续阶段的补价，按后续契约修订时的现行市况评估。相比之下，新加坡模式通过基于公式的调整，提供部分预先约定的定价机制。这为发展商在后续阶段价格上提供一定确定性，并让政府与发展商分担地价波动风险。

简言之，香港做法使发展商对未来价格波动承担更大敞口。

政策考量 尽管具有优点，鉴于北部都会区租户需求持续不确定，计划在短期内的市场参与度可能有限。

首先，发展商须承诺至少60%最高准许GFA的要求，大幅削弱了分期开发的空间。在典型市区重建场景中，地段相对较小、项目往往单期完成，该门槛几乎要求近乎全面的前期承诺。因此，计划可能仅带来有限的现金流好处，而非从根本上改变发展风险。

相比之下，新发展区内的大型地段涉及高额前期投资、更长的吸纳周期，以及更高的需求不确定性。要求在初始阶段承担至少60%总GFA，相对于需求仍属可观，尤其在北部都会区大规模土地供应的背景下。将门槛降至总GFA的20%至30%（针对北部都会区部分指定区域），或更能适应分期开发并改善可行性。

另一问题是计划的实际适用性。新发展区内土地现主要以政府卖地供应，而许多发展商更倾向于接受政府收地的特惠补偿，而非推进契约修订或换地。

综合来看，该计划更可能产生选择性、个案式的影响，而非成为非住宅发展的广泛催化剂。其成败较少取决于能否递延土地补价，而更多取决于能否解决发展规模、市场需求与投资时机之间的根本错配。