'Credibility' Critical Blow... HDC Hyundai Development Company Faces Risk of Expulsion from Housing Market

Growing Aversion to 'I-Park' Following Consecutive Accidents
Possibility of Losing Ground in Redevelopment and Reconstruction Markets
Prospective Residents Also Moving to Cancel Sales Contracts

Gwangju City announced on the 12th that it will exclude HDC Hyundai Development Company from projects promoted by the city following the collapse accident at the high-rise residential-commercial complex apartment constructed by HDC Hyundai Development Company. The photo shows the site of the new construction in Hwajeong-dong, Seo-gu, Gwangju, where six people went missing.

HDC Hyundai Development Company (HDC Hyunsan) is reeling from the building collapse accident at the I-Park complex in Hwajeong-dong, Seo-gu, Gwangju. Not only facing enormous business losses, but the company is also experiencing a collapse in trust due to consecutive major accidents, leading to speculation that it may be effectively expelled from the housing business altogether. Among the prospective residents of the complex, there are already claims that they should seek compensation from the company, and voices are emerging from frontline maintenance project associations calling for the exclusion of HDC Hyunsan.

◇ Compensation for delayed move-in reaching hundreds of billions of won... Residents considering contract termination = On the 13th, according to construction industry sources and experts, the aftermath of the Hwajeong-dong I-Park exterior wall collapse accident is expected to inevitably delay the move-in schedule for the complex.

Experts say it is difficult to make a definitive judgment based solely on the currently released photos and videos, but for safety reasons, it is advisable to completely demolish and rebuild the apartment building where the accident occurred. This is because the building's structure is intricately interconnected, so even if only a part is damaged, the entire structure can be affected.

Professor Cho Chang-geun of the Department of Architecture at Chosun University said, "While it is technically possible to partially reconstruct only the collapsed upper part, depending on the results of a detailed inspection of the lower part, it is also possible that the entire building will need to be demolished and rebuilt." A representative from Construction Company A also said, "We need to see the results of the detailed safety inspection," but added, "Based on the current condition, at least complete demolition and reconstruction of the building in question seems unavoidable."

Prospective residents are also feeling blindsided. Buyers are exchanging opinions and seeking ways to respond regarding compensation for delayed move-in and contract cancellations in SNS group chats and other forums. The delay penalty for late move-in is calculated by multiplying the amount paid so far by the contract holder (including down payments and interim payments) by the number of days delayed, then multiplying by the late fee rate. The industry estimates the late fee rate at around 18%. The construction industry expects that the apartment move-in will be delayed by at least one year due to this accident. Hwajeong I-Park Phase 2 (316 apartment units) has currently paid up to the 4th interim payment (as of December 24, 2021). Calculating the delay penalty based on full payment of the interim payments, the compensation amount for a one-year delay in move-in is estimated to exceed 20 billion won.

"I don't think I will be able to shake off the anxiety even after moving in," said some who are considering canceling their contracts altogether. Attorney Yoon Hyun-seok of Dongin Law Firm said, "According to the standard contract, if the move-in is delayed by more than three months, the contract can be terminated," adding, "Especially in this case, it is difficult to view the accident as an exception due to natural disasters, and residents are likely to exercise their contractual right to terminate the contract."

◇ Fallen trust... Will HDC Hyunsan be expelled from maintenance projects? = The bigger problem is that trust has plummeted sharply in the redevelopment and reconstruction maintenance project market. Existing contracts are increasingly likely to be canceled, and there are predictions that securing additional orders for the next few years will be impossible. For HDC Hyunsan, whose housing sector accounts for more than half of its business, this is directly linked to the company's survival.

In the Gwangju region, which has suffered consecutive accident damages, there are signs of 'cutting ties.' The redevelopment association of Unam 3 Complex in Buk-gu, Gwangju, has decided to terminate the construction contract. This complex, considered the largest redevelopment in Gwangju, had a consortium contract with HDC Hyunsan, GS Construction, and Hanwha Construction, and demolition has already been completed. The association said, "If HDC Hyunsan does not voluntarily withdraw, we will proceed with procedures such as a general meeting," adding, "Although there are damages such as project delays, we have decided that we cannot continue together."

On the morning of the 13th, the third day since the collapse accident at Hwajeong I-Park mixed-use apartment complex in Seo-gu, Gwangju, search dogs were deployed at the site to find six missing persons.

Public opinion is also worsening. On internet communities, phrases like "Don't trust and avoid" and "Permanent expulsion is necessary" are circulating. In the redevelopment association of Gaepo Jugong 1 Complex in Gangnam-gu, Seoul, which is proceeding in a consortium with Hyundai Construction, there are even calls to remove HDC Hyunsan's brand "I-Park."

This decline in reputation could also impact future business activities such as securing maintenance project orders. An industry insider said, "Recovering from lost trust is harder than enduring strong administrative sanctions like business suspension," adding, "In the current atmosphere, it seems highly likely that securing orders will be difficult not only in the affected region but nationwide." A redevelopment association official also said, "Because the building under construction collapsed, the matter is more serious," and added, "In the past, construction companies that caused major accidents had difficulty securing orders for quite a long time, and HDC Hyunsan is likely to follow the same path."

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