Another Land Purchase in Jiju Housing... Only 1.9% of Land Secured in Sangye 3 District Amid 'Mass Arrests'

Landowner Housing Project in Sanggye 3 District of New Town Cancellation Area
Deceived 246 Union Members by Falsely Confirming General Sale, Embezzling About 9.1 Billion KRW
Over 1,000 Union Members Gathered, Some Paying Up to 100 Million KRW in Contributions

[Asia Economy Reporter Lim On-yu] The regional housing cooperative project underway in Sanggye 3 District, Nowon-gu, Seoul, an area where the New Town designation was lifted, is facing the risk of collapse. Five individuals, including the actual operator of the business agency, have been prosecuted on charges of fraud for embezzling members' funds. With only 1.9% of the land actually secured, it appears practically impossible to relaunch the project.

◆Sanggye 3 Regional Housing Cooperative Embezzled 9.1 Billion KRW from 246 Members by Concealing Confirmed General Sales= According to the real estate industry on the 7th, the Tax Crime Criminal Division of the Seoul Northern District Prosecutors' Office (Chief Han Tae-hwa) arrested and indicted five people, including A (56), the actual operator of the Sanggye 3 District regional housing cooperative business agency, and B (50), the representative, on the 5th for fraud and other charges involving deceiving cooperative members and embezzling tens of billions of won. Additionally, five others involved, including D (57), the representative of the sales agency, were indicted without detention.

According to the prosecution, A and his group are accused of deceiving 246 cooperative members into believing that general sales had been confirmed from July 2017 to December last year, embezzling about 9.1 billion KRW. They promoted that they had secured more than 66% of the land needed to proceed with the project when they began recruiting applicants, but in reality, they had only secured 1.9%. Furthermore, they installed a model house, presenting it as if the general sales were confirmed by leveraging major construction company brands.

The prosecution plans to file additional charges if more complaints are received or victim testimonies are secured beyond the 246 victims who have expressed their intention to press charges so far.

A prosecution official stated, "Unlike redevelopment and reconstruction, regional housing cooperatives do not require a separate approval process for recruitment prices, which was exploited to irresponsibly recruit at low prices, causing large-scale damage. This case exploited the desperate situation of ordinary citizens excluded from rising housing prices who urgently want to own a home. We will strictly deal with such crimes that cause numerous victims."

◆Sanggye 3 District, Lifted from New Town Designation... Fraudulent Recruitment of Members Under Different Names= Sanggye 3 District was removed from the Sanggye New Town designation in July 2014 due to low project feasibility, including the presence of many unauthorized houses in the Hope Village area. The problematic regional housing cooperative project began in 2017. Members were recruited under different names such as Sanggye Shindong-A Familier and Sanggye Central View.

About 1,000 members joined the Sanggye 3 District regional housing cooperative, with contract deposits totaling 50 billion KRW. They paid contributions ranging from 30 million KRW to over 100 million KRW. Victim A said, "I signed the contract because I was told that the cooperative establishment approval would be granted in the second half of this year and that no additional contributions would be required, but all of that was false. The land use consent rate is less than 20%, making it difficult to even apply for cooperative establishment approval," lamenting the situation.

◆Regional Housing Cooperatives Are Relatively Affordable but Carry High Risks= The regional housing cooperative project involves forming a cooperative of non-homeowners or owners of a single home with an exclusive area of 85㎡ or less who have lived in the area for a certain period to build housing. Since the cooperative entrusts the developer's work, the sale price is about 20% cheaper than general apartments.

However, many projects face various problems during the process. According to the Housing Act, cooperative members are generally prohibited from withdrawing voluntarily, and many cooperatives without project feasibility cause delays or collapse, resulting in significant damage. In April last year, a regional housing cooperative promotion committee chairman in Jungnang-gu, Seoul, was arrested for embezzling more than 6 billion KRW from 103 cooperative members.

The biggest obstacle is securing land. To establish a cooperative, a land use consent rate of over 80% must be secured. Project delays are common, and many promotion committees recruit members by falsifying consent rates. In June 2017, a regional housing cooperative in Uijeongbu, Gyeonggi Province, advertised securing a 90% land use consent rate while the actual rate was only 14%.

Especially since 95% land ownership must be secured to obtain project approval, the success rate of regional housing cooperatives is even lower. According to Seoul City, there are 27 regional housing cooperatives that have received cooperative establishment approval, but none completed sales last year. A maintenance industry official pointed out, "It is difficult to verify land use consent rates, and since plausible advertising articles appear in reputable media, non-homeowners tempted to buy affordable homes are easily lured."

Due to repeated related incidents, the Ministry of Land, Infrastructure and Transport, the competent authority, plans to implement an amendment to the Housing Act from next month to strengthen project requirements. According to the amendment, cooperatives recruiting members must secure usage rights for more than 50% of the project site area. Also, to apply for cooperative establishment approval, whereas previously only over 80% land use rights were required, now at least 15% land ownership must also be secured. The amendment also allows dissolution by resolution of the general meeting if the project plan approval is not obtained within three years from the cooperative establishment approval date.

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