The blaze in November, the world's deadliest residential building fire since 1980, killed 168 people and left thousands homeless at Wang Fuk Court, a high-rise apartment complex in northern Hong Kong.

Displaced residents have urged the government to come up with resettlement options, with some hoping for the estate to be rebuilt.

Deputy Financial Secretary Michael Wong said Hong Kong authorities will spend up to HK$6.8 billion ($870 million) to acquire property titles from flat owners, either in cash or as part of a flat swap.

"The scale of the disaster is unprecedented, and currently there is no effective market mechanism to assist affected households," Wong told a news conference.

Just over 1,700 owners would receive an offer of between $441,000 to $650,000, depending on their flat's size and whether they paid land premiums.

Wong said the fire was a "special case of an exceptional nature" that warranted government intervention to avoid the flats becoming worthless.

Seven of the estate's eight towers suffered "irreversible" internal damage in the fire.

It was "not appropriate" to rebuild the complex because the process would take at least nine years, Wong said, proposing instead to build a park or community facilities on the site.

Only nine percent of flat owners surveyed insisted on redevelopment on the same site as the only option, Wong said.

"In formulating the government's package, it is impossible to satisfy the wishes of everyone," he said.

The buybacks will use an estimated $510 million in taxpayer money, with the rest coming from a relief fund.

Lau, a retiree who lived in the estate for more than four decades, told AFP last month that he and his wife preferred the quickest rehousing option.

"At my age, I can't wait a decade, even though I initially supported redevelopment," said Lau, who gave only his family name.

But resident Wong Kuen-mui, an insurance worker, said she was "quite disappointed" by the government's proposal.

"All along I was in favour of rebuilding on the same site... The acquisition price may not be enough to buy a flat of similar size," Wong said.

Those who accept the acquisition offer will have priority to pick from 3,900 subsidised housing flats, with selection set to begin in September.

The plan does not cover Wang Chi House, the sole housing block unaffected by fire, unless its flat owners reach a consensus to join, officials said.