'Nugunajip' for Sale After 10 Years... Hwaseong Neungdong 700 Million KRW, Incheon Geomdan 600 Million KRW

Living for 10 Years with Low Rent and Then Buying
Preferred Negotiation Candidate Selected... Construction Starts in 2023
Tenant's Market Profit Guaranteed if No House Price Drop

Mid-sized construction companies have massively participated in the pilot project of ‘NugunaJip,’ which allows residents to live for 10 years at rent lower than the surrounding market prices and then move in at a pre-determined sale price. Although there were initial concerns that the project would be difficult to promote due to the high risk for suppliers, the large participation of mid-sized construction companies during the public offering process is expected to give momentum to the project.

In particular, the government announced the fixed sale prices that tenants will have to pay after 10 years. Since all prices are set lower than the current market prices of nearby apartment complexes, it is analyzed that tenants’ capital gains will be guaranteed unless there is a future ‘housing price crash.’

On the 29th, the Ministry of Land, Infrastructure and Transport, Korea Land and Housing Corporation (LH), and Incheon Urban Corporation announced the results of the selection of preferred negotiators for 5,913 households in six pilot project sites of ‘NugunaJip’ that were publicly offered last September.

The pilot project sites include six blocks in three districts: Hwaseong Neungdong, Uiwang Chopyeong, and Incheon Geomdan. Hwaseong Neungdong and Uiwang Chopyeong each have one block, while Incheon Geomdan has four blocks. Gyeryong Construction, Jeil Construction, Woomi Construction, Geukdong Construction, and Geumseong Baekjo Housing were selected as project operators either as consortia or individual companies for each site.

Fixed Sale Price for 84㎡ at Around 600 Million to 800 Million KRW

In Hwaseong Neungdong District, Block A1, 890 households with exclusive areas of 74 to 84㎡ will be supplied. The sale conversion price after 10 years is 704 million KRW for 84㎡ and 638 million KRW for 74㎡. Uiwang Chopyeong District, Block A2, consists of 900 households ranging from 59 to 84㎡. The fixed sale prices are approximately 850 million KRW for 84㎡, 760 million KRW for 74㎡, and 610 million KRW for 59㎡.

In Incheon Geomdan District, prices are set per block at about 424 million to 475 million KRW for 59㎡ and 594 million to 613 million KRW for 84㎡. This is the lowest price among the three districts.

The selected companies as project operators also proposed various measures to reduce tenant burdens. The Gyeryong Construction consortium, operator of Hwaseong Neungdong District Block A1, plans to refund rent increases to tenants who move out early along with low maintenance fees. Tenants in Uiwang Chopyeong District Block A2 (Jeil Construction consortium) can receive rent exemptions for a certain period if they face economic difficulties such as unemployment or childbirth. Additionally, in Incheon Geomdan District, operators plan to provide benefits such as differential payments to tenants for excess profits from sales, housing stabilization fund support, and discounts for advance rent payments.

Tenant Capital Gains Guaranteed Unless Housing Prices Fall

NugunaJip is a ‘fixed sale price conversion type’ public-supported private rental housing where tenants live for 10 years at about 85-95% of the surrounding market rent and then receive ownership at the currently fixed sale price. The ruling party and government introduced this to help young people, newlyweds, and other non-homeowners purchase their own homes. According to the Ministry of Land, the fixed sale prices announced on this day are all lower than the current surrounding market prices.

Even if housing prices rise significantly about 13 years after the construction and rental periods combined, tenants only have to pay the fixed sale price, and all excess profits belong to the tenants. If the price falls below the initial sale price after the rental period, tenants can choose to forgo the purchase.

Because of this, the industry pointed out that the project’s profitability is low and the risk for construction companies is too high. In fact, most large construction companies did not participate, judging that they could not make significant profits, and preferred negotiators were mostly selected from mid-sized construction companies.

The government plans to start construction from the first half of 2023 after going through procedures such as project plan approval, detailed design, construction cost verification, and REIT establishment approval. Move-in is expected as early as 2025.

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