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Two Government Measures to Prevent Forfeiture of Deposit in Land Sales.

Image Caption
The upper limit of the deposit is doubled to HKD50 million; 10% of the winning bid price should be paid in 7 days.

Hong Kong Wen Wei Po (By Ngan LunLok)

Government yesterday announced to relaunch the No.4 commercial/hotel land in Kai Tak district 4C which was previously gave up by Goldin Financial, and introduced two measures to increase the cost of repudiation or "abandonment" by developers, including doubling the upper limit of deposit from HKD25 million to HKD50 million, also the winning consortium would have to pay 10% of the winning bid price subtracting the initial deposit paid in seven working days after the opening of the tender. Industry insiders point out that, raising the upper limit of deposit can make developers to consider more before entering the tender, reducing speculation, and it also test developers’ cash flow.

In mid-June, Goldin Financial gave up the commercial/hotel land of No. 4, District 4C of Kai Tak, with the HKD25 million of deposit paid in advance was confiscated by the government. There were voices pointing out that the deposit was too low and the government finally took action yesterday. The Lands Department announced yesterday that the initial deposit paid by developers when submitting tenders for government land will be increased from HKD25 million to HKD50 million. This maximum amount is applicable to values of all land that plan for sale estimated roughly by the Lands Department at or above HKD400 million.

To increase the default cost of the winning bidder.

In addition, the winning consortium shall pay part of the land price within seven working days after the opening of the tender, with the amount at 10% of the tender price subtracting the paid initial deposit, and shall be adjusted to the nearest numerical value of hundred thousand, while the winning consortium was required to pay the land price balance within one month previously.

A spokesman of the Lands Department expresses, the implementation of the two above new measures would increase the cost of default of the winning bidder, thus they would be more effectively to prevent the default by the winning bidder and to strengthen the protection of the rights and interests of the government.

As for the lands at value roughly estimated to be less than HKD400 million, the related amount has also increased, while the deposit for land less than HKD100 million must be HKD10 million, for land of HKD100-200 million must be HKD20 million, for land of HKD200-300 million must be HKD30 million, and for land of HKD300-400 million must be HKD40 million. The existing arrangement to pay the balance of land price in 28 days after the opening of the tender will remain unchanged, and the revised new arrangement is applied to the land that was tendered for sale yesterday and after.

It is estimated joint consortium investment will increase to decrease the cost.

The Senior Director and Director of the Valuation and Consulting Department of Knight Frank LLP, Lam HoMan points out that, the asset prices have risen in recent years, and the new arrangement will enable developers to consider and calculate clearly before they enter the tender, so it is good for the market also can reduce speculation. However, Lam HoMan said, the new measures will test the cash flow of developers at the same time, and it is difficult for some small and medium-sized developers to bid for different projects at the same time, so it is estimated that there will be more "consortium" to take part in the bidding.

The Kai Tak commercial land that was gave up by Goldin will be relaunched.

The Department also announced yesterday to relaunch the tender for No. 4 land in Kai Tak 4C District, and the tender will begin on August 9 with the deadline on September 20. The project can be built on about 863,165 sq ft. Lam HoMan estimates that the sq ft floor area land price is about HKD8,500-9,500, with an estimated value of above about HKD7.34 billion, down by about 10% from the previous estimate, and he frankly said the recent social event is one of the factor to be considered. Compared with the previous winning sq ft bid price of HKD12,888 won by Goldin, it is over 30% lower, and Goldin may have to pay the difference later, which is about HKD3.8 billion.
Translated by 28Hse.com . All right reserved.