'Reconstruction Giant' Dunchon Jugong Faces Crossroads Between HUG Negotiations and Post-Sale

On the 13th, demolition work for reconstruction is in full swing at Dunchon Jugong Apartment in Gangdong-gu, Seoul. Photo by Mun Ho-nam munonam@

[Asia Economy Reporter Onyu Lim] The Dunchon Jugong Association in Gangdong-gu, Seoul, which is undergoing the largest reconstruction since the era of Dangun, plans to strongly pursue post-sale if negotiations on the sale price with the Housing and Urban Guarantee Corporation (HUG) fail.

According to the real estate industry on the 15th, the Dunchon Jugong Reconstruction Association officially mentioned the possibility of post-sale through a recent newsletter. Choi Chanseong, head of the Dunchon Jugong Association, stated, "If we cannot set the desired sale price through negotiations with HUG, we will keep all possibilities open, including post-sale."

Dunchon Jugong is currently negotiating the sale price with HUG before the general sale. Initially, it was expected that negotiations would be completed by the end of April, when the grace period for the private land sale price ceiling system ends, but the situation changed due to the spread of the novel coronavirus infection (COVID-19). The government decided to implement the sale price ceiling system from the end of July, considering the difficulty of holding general meetings of association members.

For Dunchon Jugong, whose negotiations with HUG have not been smooth, this has bought three months of time. Last month, the association applied for a sale guarantee at 35.5 million KRW per 3.3㎡ without finding a compromise on the sale price during preliminary consultations with HUG, but this was rejected. It is known that HUG proposed around 30 million KRW per 3.3㎡, a difference of more than 5 million KRW.

However, it is uncertain whether a different outcome can be derived from negotiations with HUG despite the extended time. This is also the background for the association mentioning the possibility of post-sale in the newsletter. Head Choi said, "We have made strenuous efforts to enforce the sale price with HUG continuously, but due to the government's policy to control the real estate market through various regulations, HUG is trying to set a low sale price based on standards that violate fairness," adding, "Our position that we cannot accept the sale price previously set by HUG remains unchanged."

The association is known to have commissioned a consulting firm to analyze the business feasibility of post-sale. They plan to share the simulation results with association members as soon as the final results are available. The problem is funding. If negotiations with HUG fail and post-sale is chosen, construction must proceed with self-funding first. The Dunchon Jugong reconstruction is a large-scale project with 5,000 units for general sale alone, and construction costs are estimated to exceed 3 trillion KRW. A maintenance industry official said, "Usually, when proceeding with post-sale, the association can choose project financing (PF) through joint guarantees with the construction company, but considering the recent tightening of the PF funding market due to COVID-19, it is not an easy path."

This content was produced with the assistance of AI translation services.