[Ryu Taemin's Real Estate A to Z] The Emerging Alternative 'Mini Reconstruction'... How Does It Differ from General Reconstruction?

[Asia Economy Reporter Tae-min Ryu] Small-scale reconstruction, known as 'mini reconstruction,' and street housing maintenance projects are gaining momentum. Recently, as large-scale reconstruction has been hindered by strengthened regulations such as safety inspections, interest in mini reconstruction among small-scale aging complexes is increasing. In particular, as the previously cited drawback of low profitability has improved, the number of projects being promoted, especially in the Gangnam area, is rising.

Small-scale reconstruction has a shorter project period than general reconstruction. This is because procedures such as safety inspections and designation of maintenance zones, which are difficult in general reconstruction, are omitted in small-scale reconstruction. After urban architectural review, the project implementation approval and management disposition approval can be integrated, significantly shortening the project duration. Small-scale reconstruction typically takes about 3 to 4 years, roughly half the time of general reconstruction projects, which usually exceed 8 to 10 years.

The street housing maintenance project is a business that improves the residential environment by renovating old houses in small-scale district units. Introduced in 2012 as part of small-scale maintenance projects, it is carried out while maintaining the existing street block (an area surrounded by roads) in residential areas smaller than 10,000㎡. Similarly, safety inspections and designation of maintenance zones are omitted, and project implementation and management disposition approvals are integrated.

Mini reconstruction had been overlooked in the market due to low profitability caused by its small scale. However, interest is increasing recently as reconstruction regulations have been strengthened and Seoul City has expanded incentives through mini reconstruction revitalization plans. Earlier, in 2018, Seoul City raised the floor limit for Type 2 general residential areas to a maximum of 15 floors and relaxed the maximum floors to within 10 floors for areas below 7 floors.

Moreover, the atmosphere is becoming more active as the government pushed for expanding the project implementation area last month. On the 16th of last month, the Ministry of Land, Infrastructure and Transport announced a legislative notice for the amendment of the Enforcement Decree and Enforcement Rules of the Special Act on Vacant Houses and Small-scale Housing Maintenance, deciding to expand the possible implementation area for street housing maintenance projects from the existing 10,000㎡ to 20,000㎡.

In fact, complexes entering street housing maintenance projects are increasing mainly in the Gangnam area. According to Seoul City, as of June this year, 105 places in the city are promoting street housing maintenance projects. Compared to 63 places at the end of June last year, this means more than 40 places have increased in one year. Especially, 39 places are promoting street housing maintenance projects in the so-called Gangnam 4 districts: Gangnam, Seocho, Songpa, and Gangdong-gu.

However, experts say that the project scale is still small, making it difficult to completely solve the supply shortage problem with only small-scale maintenance projects. Song Seung-hyun, CEO of Urban and Economy, said, “In some areas where reconstruction or redevelopment is difficult to promote, the residential environment can be improved, but there are limits to solving insufficient supply with small-scale reconstruction or street housing maintenance projects.”

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