Super-alarm for Reconstruction Associations

The reform bill of “Urban and Living Environment Improvement Act” which mandates rental apartment construction when rebuilding old apartments has passed the Legislation Assessment Subcommittee under the Construction and Transportation Committee. As the reform bill is expected to take effect from late April as planned by the government, associations pushing for reconstruction in the Gangnam and Songpa areas in Seoul are under a state of emergency.

The Construction and Transportation Committee held a legislation assessment session on that day and decided to present the revised bill to the general meeting on February 23. Also, because the ruling and opposition parties are not particularly divided over the passage of the bill, the bill is expected to pass the National Assembly’s committee and its plenary session smoothly.

The Ministry of Construction and Transportation said, “As soon as the revision of the bill is finalized, subordinate rules such as enforcement ordinances and regulations will be amended accordingly,” and added, “We will be able to enforce the law from late April as scheduled since the design process of legislation has already been concluded.”

If the revised bill goes into effect, the complexes that were unauthorized for reconstruction before the bill’s implementation must assign 25 percent of the gross floor area ratio (the ratio of gross floor area to land area) for rental apartments.

In return, the government raises the gross floor area equivalent to the area of rental apartment complex.

Apartment complexes that have been approved for rebuilding, but have not applied for pre-sales, must build 10 percent of the increased gross floor area ratio due to reconstruction as rental apartments. In this case, no additional gross floor area ratio is granted.

Housing complexes that have completed the procedures of pre-sales application are not subject to the system of development gains restitution.

With implementation of the reform bill, the profitability of reconstructed apartments is expected to fall, which will make the rebuilding projects difficult.

The recent measure has set the apartment reconstruction associations located in the so-called Gangnam area, including Gangnam-gu, Seocho-gu, and Songpa-gu, scrambling for countermeasures to expedite the reconstruction projects.

They had thought that the reform bill would take effect from June to July this year at the earliest even though the bill would pass the latest extra session of the National Assembly.

The Chamshil Chugong 2 Complex in Songpa-gu is known to have advanced the regular pre-sales period to April from May as earlier scheduled.

A construction firm official said, “We’re planning to apply for pre-sales approval late March after the drawing of room numbers and buildings early next month,” and continued, “There are conflicts between a few association members over additional fees for reconstruction, but this will be resolved shortly.”

Chamshil Chugong 1 Complex has reportedly set plans to finalize its building and room number drawings and the pre-sales application by early April instead of late May as previously scheduled.

Jae-Seong Hwang Ho-Won Choi jsonhng@donga.com bestiger@donga.com