Sources: Aerial Survey Kowloon and the New Territories (1963) Lands Department Open Data; Google Earth 2026.
Sources: Aerial Survey Kowloon and the New Territories (1963) Lands Department Open Data; Google Earth 2026.
Since the earliest days of colonial rule, the Hong Kong government has from time to time needed to acquire private land to provide for societal needs and urban expansion. Today, land resumption is typically carried out through cash compensation, but for much of the 20th Century, Hong Kong relied on a system of land exchange entitlements. Under this arrangement, the government issued documents commonly known as “Letters A/B” as compensation to New Territories landowners whose land was required for development. Those in possession of said documents could redeem them for land in newly developed districts. Major development projects in areas such Sha Tin, Tsuen Wan, Tseung Kwan O, and East Tsim Sha Tsui all involved this type of land exchange, demonstrating its profound impact on Hong Kong’s land planning and the development of its new towns.
When Britain leased and formally took over the New Territories in 1898, Governor Henry Arthur Blake assured local villagers that their existing rights, customary laws and traditions would be respected and maintained. He also promised that any land resumed for public works or government purposes would be purchased at a fair price. Decades later, Sir Philip Haddon‑Cave, a former Colonial Secretary who had served as a District Officer in the New Territories during the 1960s and 1970s, recalled in his memoir “Feeling the Stones” that, although the government had the authority to compulsorily acquire land for public purposes under the Lands Resumption Ordinance, officials frequently refrained from using its powers in order to honour the promises made to the inhabitants of the New Territories.
After World War II, an influx of refugees from mainland China swelled Hong Kong’s urban population, resulting in overcrowding. The government began planning satellite towns and new towns in the New Territories, projects that required extensive land resumption. However, many New Territories landowners resisted cash compensation, preferring to retain development rights over their land. To ease the government’s financial burden while simultaneously addressing villagers’ concerns, a land exchange system was introduced.
In 1952, the government first introduced the “Letter of Exchange” to encourage landowners to voluntarily surrender their titles. This was formalised in 1960 into a system of exchange entitlements that came in two types: Letter A and Letter B. Letter A was an extension of the earlier scheme and was issued to owners who voluntarily surrendered their land. Holders could exchange each square foot of surrendered building land for an equivalent amount of building land elsewhere. Letters B, on the other hand, were issued to landowners in the New Territories whose land was formally (i.e. compulsorily) resumed under a notice of land resumption and acquisition. In general, landowners were entitled to exchange every five square feet of surrendered agricultural land for two square feet of building land in the New Territories, or every four square feet of agricultural land for one square foot of industrial land.
Land acquired through land exchange entitlements was mostly located in prime spots in new towns, i.e. as Lung Fung Garden in Sheung Shui. Photo credits: Faimeim Tahimo 800, Wikimedia Commons, CC BY-SA 4.0, 2021 (left), and City Unseen, 2026 (right).
As new towns began to take shape, the government sometimes restricted participation in land auctions to those who held land exchange entitlements. Holders could use their letters to offset part or all of the land premium when bidding for lots. In some cases, holders of Letter B entitlements were permitted to use them not only in the New Territories but for designated sites within the urban area (Kowloon and Hong Kong Island).
However, in the early phases of new town development, the amount of land available for exchange was limited, yet the number of entitlements issued kept rising. Since most villagers only owned a small piece of land, it was difficult for individuals to exchange their certificates for an entire new building lot. Moreover, the government did not restrict the sale or transfer of the entitlements. Property developers quickly recognized an opportunity and began purchasing and consolidating Letters A/B in bulk, using them to compete in auctions limited to entitlement holders. This quickly ignited a wave of speculation. Villagers whose land had been resumed struggled to compete with developers and often had no choice but to sell their Letters A/B at low prices. In his book “Land Administration and Practice in Hong Kong”, former Lands Department surveyor Roger Nissim recounts that property agents would follow postal carriers to villagers’ homes in the hopes of buying letters A/B as soon as they landed in their mailboxes.
Many shopping centres and housing estates in the New Territories were developed on land obtained through this process. The developers most heavily involved in the trend included Chinachem Group, Sun Hung Kai Properties, Henderson Land Development, and Nan Fung Group. Some villagers remember that Nina Wang, the late chairperson of Chinachem Group, personally negotiated with them to purchase their land rights. There was even a saying, “Add a toilet to your farm, and you can trade it for a shop in Lucky Plaza”, that showed how much profit was involved in the system.
Once developers collected enough Land Exchange Entitlements, they could pay the difference in land premium to acquire land for development. Since the entitlements could be traded freely on the open market and had no expiry date, many housing estates built in the 1990s were based on letters issued between the 1960s and the 1980s. The absence of time limits and regulatory controls not only spurred real estate speculation but also created ongoing challenges for Hong Kong’s later land development policy.
Brighton Place, Tsuen Wan, completed in November 1999, was the last development to have been built through land exchange entitlements. Photo credits: Google Street View, 2024 (left); City Unseen, 2026 (right).
As the government continued to issue more Land Exchange Entitlements, the amount of land available in new development areas fell far short of what was needed to redeem them, worsening Hong Kong’s “land debt” crisis. The problem was this: after subtracting all the land needed for roads, public housing, and community facilities, the government often found there was not that much land left to auction. Plus, developing a new area usually required issuing even more Land Exchange Entitlements, which put them deeper in the hole.
By 1980, unredeemed entitlements reached 32 million square feet, with about 27 million issued between 1976 and 1980. Since it was impossible to foresee when this land debt would be resolved, the government considered restricting the resale of entitlements, but dropped the plan due to strong opposition.
Graph by City Unseen of the government’s cumulative land debt, 1960-1980 (left) based on table of outstanding Letter A/B commitments (right), Public Records Office, Government Records Service HKRS684-5-91.
Starting in the late 1970s, the government shifted to compensating land owners half in cash and half in entitlements to reduce the pressure on redemption. In 1983, the government stopped issuing new entitlements altogether and transitioned to offering only cash compensation for new land resumed. This shift coincided with increasing land scarcity in new town areas, and the complex negotiations between China and Britain over Hong Kong’s future. These negotiations culminated in the 1984 Joint Declaration, which imposed an annual limit of 50 hectares on land sales until change of sovereignty in 1997.
Nonetheless, outstanding entitlements still totaled 138 hectares of land, many of which lacked expiration dates, which made it more difficult for the government to forecast when they might finally all be redeemed. During the 1980s and 1990s, many auctions were restricted to entitlement holders, including some urban sites like Chinachem’s Broadway Plaza in East Tsim Sha Tsui, where land premiums could be offset with Letter B entitlements. Chinachem Group accumulated huge numbers of entitlements in the 1970s and 1980s, allowing it to acquire prime sites in Tsuen Wan and East Tsim Sha Tsui.
The government’s land debt was so large that it released some prime urban sites, such as this one in East Tsim Sha Tsui to holders of Letter A/B entitlements. Photo credits: Wpcpey, Wikimedia Commons, CC BY-SA 4.0, 2021 (left); City Unseen, 2026 (right).
Meanwhile, the government also attempted to buy back land entitlements with cash, but this proved ineffective as their market price continued to soar. In 1991, it proposed terminating the land exchange system entirely. However, developers buoyed by rising land values refused to surrender their entitlements. Finally, as the handover approached, the Legislative Council passed the New Territories Land Exchange Entitlements (Redemption) Ordinance, mandating cash redemption at market rates for all outstanding entitlements. This ended the thirty-year Letters of Exchange Entitlement regime, converting land debt into fiscal liabilities to be gradually absorbed.
The Land Exchange Entitlements were a unique artefact of Hong Kong’s urban development history. Initially designed as a temporary measure to promote development on a tight budget while recognizing indigenous land rights, it spiraled into a tool for property speculation, giving rise to so many problems that ultimately, the only solution was to revert to cash.
Roger Nissim, Land Administration and Practice in Hong Kong (5th Edition), 2021, Hong Kong: Hong Kong University Press.
〈今年上半年新界各區有地供投換〉(“Land in various New Territories districts is available for bidding or exchange in the first half of this year”), Wah Kiu Yat Po, 1 January 1975.
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