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Gov`t to Abolish Post-Construction Sales System

Posted August. 21, 2008 06:31,   


The sales system of allowing rebuilt apartments to be put on the market after 80 percent of construction is finished will be abolished in five years.

The government is also considering raising the floor area ratio of reconstructed buildings, which affects the profitability of construction companies, by up to 50 percentage points over the mid- and long-term period.

The Land, Transport and Maritime Affairs Ministry plans to announce these real estate measures today.

The measures include △ deregulating reconstruction, △ easing price cap regulations, △ and increasing the housing supply by expanding the new cities of Segyo (Gyeonggi Province) and Geomdan (Incheon).

As the first phase of its policy to ease regulation on reconstruction, the ministry will adopt measures that do not greatly affect housing prices. The measures include abolishing the post-construction sales system, allowing unionized members to sell their rights to live in rebuilt apartments, and streamlining related procedures.

The previous administration introduced the post-construction sales system in July 2003 for builders seeking approval for reconstruction in areas with high speculation. Since the system is known to contribute to higher apartment prices, the incumbent government will abolish the system. Accordingly, construction companies can sell 68,900 units of rebuilt apartments when construction begins.

The second phase to start late this year includes more drastic measures such as deregulating the floor area ratio and rules that force construction companies to build rental and smaller houses along with reconstructed apartments.

Provincial governments require a floor area ratio of up to 250 percent in residential areas. The limit, however, will rise to 300 percent in accordance with the Act on Planning and Use of National Territory. Also, 50-75 percent of the expanded area will be allotted to smaller houses.

To ease the cap on apartment prices, the government will allow builders to reflect unexpected expenses such those for removing rocks and strengthening the ground into the land cost.

In a news conference yesterday, the ruling Grand National Party’s chief policy-maker Lim Tae-hee said, “The government will slightly lower the capital gains tax to help owners of one home to sell, but a tax exemption is impossible.”

legman@donga.com koh@donga.com