Preventing a Second Daejang-dong... Limiting Public-Private Development Profit Rate to Within 10%

Legislative Notice for Amendment of Subordinate Legislation under the Urban Development Act

View of the Pangyo Daejang Urban Development Project Area, Bundang-gu, Seongnam-si, Gyeonggi-do

The profit margin that the private sector can take in public-private joint urban development projects will be limited to 10%. This measure is aimed at preventing incidents like the Daejang-dong case in Bundang-gu, Seongnam-si, where the private sector took profits worth several hundred billion won.

On the 10th, the Ministry of Land, Infrastructure and Transport announced that it will conduct a legislative and administrative notice on the amendment of the 'Enforcement Decree of the Urban Development Act' and the 'Urban Development Work Guidelines' as a follow-up measure to strengthen the public nature of public-private joint urban development projects.

The main contents are ① strengthening the recovery of private development profits, ② enhancing the public nature in the process of promoting public-private joint urban development projects, and ③ strengthening the management and supervision of urban development projects.

First, an upper limit on the private profit margin in public-private joint urban development projects has been stipulated.

To limit private development profits to an appropriate level, the upper limit of the private profit margin in public-private joint urban development projects was set at within 10% based on the total project cost borne by the private sector.

At the same time, the components of the total project cost were specifically defined as land cost, land burden charges, relocation measures cost, development cost, etc., and detailed calculation standards for each item were prepared, thereby specifying the method of calculating the total project cost.

In addition, profits exceeding the upper limit will be reinvested for various purposes according to the law, and among the reinvestment targets, the types of facilities for improving living convenience were defined as public and cultural sports facilities, parking lots, and complex transfer centers.

The procedures and methods for public-private joint urban development projects were also newly established.

Detailed project procedures for public-private joint urban development projects were set, and the relevant evaluation plans must be disclosed when soliciting private participants. Furthermore, in addition to the matters stipulated by law to be reflected in the agreement (such as role sharing among investors, profit margin, cost sharing, and revenue distribution), matters related to the supply and disposal of developed land and reinvestment of development profits were added.

Procedures and standards for rental housing plans will also be strengthened.

Currently, there is no separate review procedure when the rental housing plan reflected in the development plan is changed, but in the future, if the rental housing decreases by more than 10% compared to the original development plan, the urban planning committee must review it.

Also, the mandatory ratio of rental housing to be reflected in the development plan could previously be adjusted by the designated authority within a range of ±10 percentage points considering the supply and demand situation of rental housing in the area, but this discretionary range has been reduced to ±5 percentage points.

Furthermore, consultations and inspections by the central government will be expanded.

Currently, the designated authority consults with the Minister of Land, Infrastructure and Transport only when the urban development zone area is 1 million square meters or more, but the consultation target zone area has been expanded to 500,000 square meters or more to strengthen the consultation process.

The specialized institutions that the Minister of Land, Infrastructure and Transport can request inspections from have been defined as the Korea Research Institute for Human Settlements, Korea Real Estate Board, and Housing and Urban Guarantee Corporation (HUG), considering their expertise.

An official from the Ministry of Land, Infrastructure and Transport said, "Through this amendment, we expect to enhance transparency in the promotion process of public-private joint projects and strengthen the public nature of the projects."

The legislative and administrative notice period for the amendment of the subordinate statutes of the Urban Development Act is from March 11 to April 20, 2022 (administrative notice until March 31), and after consultations with related ministries and review by the Office for Government Policy Coordination, it is scheduled to be enforced from June 22.

The full text of the amendment can be found on the Ministry of Land, Infrastructure and Transport website, and if there are any opinions on the amendment, they can be submitted by mail, fax, or through the Ministry of Land, Infrastructure and Transport website.

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