The developer, chaired by billionaire Lee Shau-kee, will meet the towering premium the government has imposed on the Wu Kai Sha plot, sources said.

The site, for residential use, is adjacent to the mass-end project Lake Silver of rival Sino Land (0083).

The cost of conversion alone will be upwards of HK$3,000 per square foot. Secondary homes at Lake Silver are currently priced at HK$5,500 psf.

The 1.2 million sq ft site at Lok Wo Sha may deliver a gross floor area of around 2.95 million sq ft from the construction of more than 20 residential blocks, or a total of 3,300 flats.

Surveyors expect the units to cost about HK$5,000 psf, after taking construction expenses into account.

The properties will be selling for at least HK$6,000 psf if it is to retain a decent profit.

Henderson has been negotiating with the government for years over the land premium for the site.

The developer had insisted the premium should be lower because the site does not share the same views as flats above Wu Kai Sha station. It also said some blocks in the project will face each other.

Lee will hold a press conference today to announce details of the deal.

Recently, Henderson stirred controversy over the sale of its 68th-floor duplex home at 39 Conduit Road in the Mid-Levels at HK$71,280 psf.

The sale sparked calls by lawmakers for more transparent property transactions.

Ronnie Chan Chi-chung, chairman Hang Lung Properties (0101), said the Conduit Road price may not be genuine.

Also, at a meeting between top executives of leading developers and Financial Secretary John Tsang Chun- wah on Tuesday, Henderson sent Leung Kam-leung, its general manager of the property planning department.

Leung is not the most senior operations manager in the company.

The premium that Henderson is about to pay may prove excessive because the luxury market has shown clear signs of slowing after the Hong Kong Monetary Authority last week introduced curbs to rein in prices.

Meanwhile, in the first property auction since the introduction of the new measures, AA Property Auctioneers yesterday failed to sell any of the four luxury homes it put on the block.

Prices ranged between HK$16 million and HK$68 million for the luxury units.

Louis Chan Wing-kit, at Centaline residential department, said the auction results were "very bad." AA Property had put a total of 18 units on the block and managed to sell only four of them.

Jeffrey Ng Chong-yip, chief executive of Midland's residential department, said people have adopted a wait- and-see strategy, which is adversely affecting sales of properties worth more than HK$20 million.

Ng believes buyers want to be sure about the government's intent on containing the upside momentum in the property market.

"Why will homeowners pay 10 percent more when properties will be cheaper later?" Chan of Centaline asked.