The Extension of Government Leases Ordinance came into effect on Friday, providing a precise and stable environment for the real estate investment market in Hong Kong.

In June, the Legislative Council passed the ordinance into law. Under the new legislation, the Lands Department has established a new statutory mechanism to extend general purpose leases on residential, commercial, industrial and other properties that do not contain a right of renewal and expire on or after 5 July in batches.

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The ordinance stipulates that unless there is significant public interest, general purpose leases will be extended for a term of 50 years without payment of an additional premium, but an annual rent equivalent to 3 percent of the rateable value of the property will be charged.

The Hong Kong General Chamber of Commerce, the Chinese Manufacturers’ Association of Hong Kong, the Federation of Hong Kong Industries, and the Chinese General Chamber of Commerce issued a joint statement lauding the new legislation for providing certainty over land lease policies and fostering a stable business environment

Owners do not have to perform any procedures for handling lease extension matters, improving convenience for the public and for businesses.

In accordance with the requirement under the ordinance to give six years' prior notice, the department will publish the next extension notice at the end of 2024, which will cover land leases expiring in 2031.

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On Friday, the Hong Kong General Chamber of Commerce, the Chinese Manufacturers’ Association of Hong Kong, the Federation of Hong Kong Industries, and the Chinese General Chamber of Commerce issued a joint statement lauding the new legislation for providing certainty over land lease policies and fostering a stable business environment.

“The predictability of lease extensions will also facilitate approval of mortgages related to the properties, which will enhance the confidence of owners and investors, as well as strengthen Hong Kong’s status as an international financial center. This demonstrates that the “one country, two systems” principle will continue to provide long-term stability and prosperity for Hong Kong,” the statement said.

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The four business chambers suggested that the government of Hong Kong Special Administrative Region should conduct public education campaigns to clearly explain to stakeholders how the new extension mechanism operates and protects their interests.

China Real Estate Chamber of Commerce Hong Kong and International Chapter (CRECCHKI) stated that the new law not only relieves concerns about the "2047 deadline" but also provides a precise and stable environment for real estate market investment.

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“The new legislation greatly improves the efficiency of the land management mechanism and the value of real estate, making it convenient for the people and business. The confidence of local and international investors will be enhanced,” the statement added.

According to CRECCHKI data, on June 30, 2047 alone, the land leases expiring on the same day would amount to approximately 300,000 lots involving more than 1.5 million owners.