Government charges new standard rates for land premium in redevelopment of industrial buildings constructed before 1987 into new development for modern industrial uses
The Lands Department (LandsD) announced today (April 10) that new standard rates will apply with retrospective effect from April 1, 2025, for charging land premiums for lease modifications (including land exchanges) with regard to the redevelopment of pre-1987 industrial buildings (IBs) on industrial lots into new developments for modern industrial uses.
The standard rates arrangement for charging land premium in the redevelopment of IBs was first launched in 2021 as an alternative to the conventional premium assessment mechanism. The arrangement aims to provide certainty regarding the premium chargeable for lease modifications and streamline development procedures to expedite the redevelopment of pre-1987 IBs, which were constructed under a set of lower fire service installation requirements before the Code of Practice for Minimum Fire Service Installations and Equipment was revised by the Fire Services Department in 1987.
Under the previous arrangement, differential standard rates were set for: (i) five broad regions in Hong Kong, and (ii) within each region, four uses, namely: "industrial/godown (except special industrial)" use and "special industrial" use before lease modification, as well as "commercial/modern industrial" use and "residential" use to be permitted under the modified lease, for the calculation of the premium chargeable.
The level of the standard rates applicable to the redevelopment of IBs is reviewed annually by the LandsD to ensure that the rates are in line with prevailing market conditions. In its Practice Note No. 5/2025 issued today, the LandsD promulgates the updated standard rates applicable to the redevelopment of IBs as of April 1, 2025. At the same time, the LandsD promulgates, for the first time, separate standard rates for "commercial" and "modern industrial" uses after lease modification. The separation of the standard rates for "modern industrial" use from "commercial" use is to better reflect the land value of redeveloped IBs intended for modern industrial use.
A spokesperson for the LandsD said, "Hong Kong is now on its strategic path of planning innovative and technological developments. In view of the increasing number of IB-related transactions in the market and to cope with the growing demand for modern industries under the era of new quality productive forces, it is now an opportune time to set two independent categories of standard rates for 'commercial' and 'modern industrial' for the redevelopment of IBs. The promulgation of a separate standard rate for 'modern industrial' use will provide enhanced certainty to applicants who wish to redevelop their IBs for such use, and is supported by industry and professional organisations."
With the coming into effect of Practice Note No. 5/2025, differential standard rates will apply for five uses, namely: "industrial/godown (except special industrial)" and "special industrial" uses before lease modification, and "commercial", "modern industrial" and "residential" uses after lease modification.
