Hyundai Construction in Negotiations, Consecutive Project Groundbreakings Draw Attention

Successful Groundbreaking of Daejo 1 District and Bangbae 5 District
Trust Between Association and Construction Company Leads to Smooth Construction Cost Negotiations

The Daejo 1 District project site in Eunpyeong-gu, which began construction on the 21st.
[Photo by Hyundai Construction]

[Asia Economy Reporter Cha Wanyong] Amid a surge in redevelopment complexes where construction companies' selection has been canceled or projects delayed due to conflicts over construction costs between associations and contractors, Hyundai Construction is consecutively announcing groundbreaking news for major projects in Seoul.

According to Hyundai Construction and the urban maintenance industry on the 26th, Hyundai Construction began construction on the Daejo 1 District redevelopment project (2,451 households) in Eunpyeong-gu, which had been halted for the past three years, on the 21st. This project planned to start construction immediately after relocation and demolition were completed following the management disposition approval in May 2019, but internal conflicts such as the dismissal of the association's executive last year delayed the signing of the main contract and the start of construction.

After normalizing the association, negotiations on construction costs reflecting the rise in raw material prices were conducted with Hyundai Construction, the contractor, and in July, an extraordinary general meeting was held to approve the main construction contract as originally planned, resolving the conflict over construction costs for the time being. The Daejo 1 District, which has now begun construction, is expected to launch sales in the first half of next year.

Hyundai Construction also succeeded in starting construction on the Bangbae 5 District reconstruction project (3,065 households) in Seocho-gu, which had faced difficulties due to conflicts within the association. Immediately after the new association executive was inaugurated in May this year, negotiations on construction costs were conducted, and after agreeing on the costs and obtaining construction approval from the licensing authorities, construction began at the end of July. Sales are scheduled for the second half of next year.

The urban maintenance industry cites Hyundai Construction’s ‘negotiation skills’ as the key factor behind its successive groundbreaking successes. It is analyzed that continuous management of the association and mutual trust led to successful and smooth negotiations on construction costs.

In fact, in recent redevelopment and reconstruction projects, there have been numerous cases where projects were delayed due to conflicts over increased construction costs between associations and contractors after contractor selection, leading to re-bidding. Heukseok 2 District and Sillim 1 District are representative examples.

This is due to the increased burden of construction costs caused by the unstable real estate market situation and the rise in raw material prices. In the cement industry, prices were raised by 15-18% in April, and from this month, prices will increase by 15% per ton. Rebar prices have risen 72% compared to 2020, and domestic plywood prices have more than doubled per sheet, showing a continuous rise in construction raw material costs.

Given this situation, the volume of construction starts this year has shown a continuous downward trend. According to data from the Ministry of Land, Infrastructure and Transport, nationwide housing construction starts in July were 34,633 households, down 12% from the previous month (39,430 households) and 17% from the previous year (41,648 households). Monthly construction starts this year have decreased every month compared to the same period last year, with a total of 223,082 housing starts nationwide from January to July, a sharp drop of 28.25% compared to 310,937 households in the same period last year.

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