SUMMARY
This paper describes the success of MTR Corporation in funding and financing a commercially-orientated
railway in Hong Kong with growth through an integrated rail-property model. The MTR network covers a
total route length of 211 km, and provides metro, suburban railway service, light rail, feeder buses and
intercity through-trains to Mainland China. The integrated rail-property model translates land development
rights from the Government for railway construction into property profits to help bridge funding gaps for new
railway construction and future asset renewal and upgrade. The Corporation is responsible for both the
railway and property development. This provides a unique opportunity to optimise integration of land use
and transport facilities, as well as provide socio-economic benefits. In the past years, MTR Corporation has
generated over HK$177 Billion (A$23.8 Billion) of value accretion for the Government.
INTRODUCTION
Land scarcity and high population density in Hong
Kong has shaped the requirement for effective
land use and capital resources through integrated
land use and transport planning. MTR Corporation
adopts a rail-property model by undertaking
residential and commercial developments along its
railway lines to create the required integration.
The model is highly successful and contributes to
business sustainability of the railway and
generates major socio-economic benefits. More
recently, MTR Corporation has entered into
overseas agreements on a variety of models
including PPP concession as well as with the Hong
Kong Government on future rail lines using a
range of financing models.
Andrew McCusker
MTR Corporation Limited
AFFORDABLE TRANSPORT
City governments will note that the construction
costs of railway are high and need to cover
stations, tunnels, tracks, signalling, rolling stock,
etc. Where land may be freely granted by the city
government, uptake of land by the railway actually
constitutes an opportunity cost and can deprive
society of alternative land use. This is not always
appreciated.
City governments need certainty about recurrent
transport costs. However, most railways depend
on Government grants and subsidies to continue
operation and fund necessary asset renewals and
upgrade.
The extent to which fare and non-fare revenues
can cover railway or metro operating costs is not
well understood by those who benefit from usage.
Figure 1 is based on a CoMET benchmarking
study which ranks 20 typical metros by their ability
to recover operating cost. According to revenueoperating cost ratios, about 70% of these metros
could not support their operating expenditure by
farebox and commercial revenues alone. MTR
Corporation is among the few metros operated on
high revenue-operating costs ratio.
Andrew McCusker
MTR Corporation Limited
Transport expenditure as % of
household expenditure
17.4%
Portugal (1)
France (1)
15.5%
15.1%
14.7%
14.5%
Spain (1)
13.0%
London (3)
12.8%
Italy (1)
12.5%
Tokyo (4)
10.0%
9.0%
10
15
20
Percentage
(1)
(2)
(3)
(4)
(5)
Andrew McCusker
MTR Corporation Limited
RAIL-PROPERTY MODEL
How does the rail-property model work? The
Government grants MTR Corporation the
development rights for land above or adjacent to
the railway stations to help finance the
construction work, in lieu of injecting cash or
providing direct subsidies. The Government
receives proceeds at full market value (land
premium) for the land grants evaluated on a
greenfield basis, i.e. before any value added.
Andrew McCusker
MTR Corporation Limited
Andrew McCusker
MTR Corporation Limited
Andrew McCusker
MTR Corporation Limited
REFERENCES
[1] Kenworth JR Transport Energy Use and
Greenhouse Gases in Urban Passenger
Transport Systems: A Study of 84 Global
rd
Cities International 3 Conference of the
Regional Government Network for Sustainable
Development,
Notre
Dame
University,
Fremantle, Western Australia, 2003.
[2] Cox Wendell - Performance Indicators in Urban
Transport Planning 8th International
Conference on Competition and Ownership in
Land Passenger Transport (Thredbo 8), Rio de
Janeiro, 2003.
[3] Hong Kong Special Administrative Region
Government Hong Kong 2030 Planning
Vision and Strategy. 2007 October.