Increased Incentives for Large Private Construction Companies to Participate in Public Land Development in the Seoul Metropolitan Area

[Asia Economy Reporter Yoo In-ho] The method of allocating land for apartment construction within public housing districts by lottery, which has been maintained for 36 years since 1984, will change to a competitive evaluation system starting next year. This is expected to be applied from the 3rd New Towns, allowing solid large private construction companies to participate first, which is anticipated to improve the quality of public housing.

The Ministry of Land, Infrastructure and Transport will improve the current lottery system for supplying apartment land from next year by evaluating construction companies based on housing quality and participation in government housing welfare policies, and prioritize supply to reliable companies through a competitive method.

Next year, 36% of apartment land within public housing sites will be converted to a competitive system, expanding to 60% by 2024.

Since the apartment construction land in land development districts or public housing districts has been supplied by lottery since 1984, except for a temporary implementation of bond bidding systems around 2005-2006, the lottery method has been maintained.

Although the lottery system was maintained due to concerns that a competitive bidding method might raise housing prices, there were loopholes such as using paper companies or mobilizing affiliates to increase winning chances.

Accordingly, the Ministry of Land plans to use eco-friendly and housing quality-related indicators as criteria for land subscription, granting priority supply rights to companies meeting a certain standard, and blocking public land bids by construction group affiliates whose sole purpose is land acquisition.

Companies with excellent records participating in government initiatives such as purchase agreement-type rental housing and public jeonse housing projects, presented in the government's jeonse policy, will be given priority supply or additional points in bidding.

Differentiated land supply types will also be introduced, such as mandating rental housing construction or targeting public REITs.

First, a certain ratio of rental housing construction will be mandated, and land will be supplied to excellent companies by evaluating social contribution-related project plans such as providing convenience to residents and community facilities within complexes.

The construction industry expects that with the introduction of this competitive evaluation system, participation of large private construction companies in public land development in the metropolitan area, including the 3rd New Towns, will increase.

One reason why large construction companies had a low market share in the housing market during the public land development era from 2000 to 2014 was that land was supplied by lottery, resulting in low participation of large construction companies in public land acquisition and development.

An industry official said, “Since public land supply including the 3rd New Towns is expected to be in full swing after 2022, the introduction of the public land competitive evaluation system will be positive for large construction companies,” adding, “This aligns with the recent government efforts to expand design methods at the level of private brand construction companies to public housing to improve public housing quality.”

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