Gwacheon Jijeongta S-2 Housing Development Public REIT Fails... Sale Announcement Next Month

"Low Bidding Due to Rebar and Concrete Shortage and Economic Downturn"

Land Use Plan Map of Gwacheon Knowledge Information Town S-2 Block.
[Photo by LH]

[Asia Economy Reporter Noh Kyung-jo] The last remaining private residential land parcel 'S-2 Block' in Gwacheon Knowledge Information Town (hereafter designated as Jijeongta) in Gyeonggi Province will begin searching for a developer next month. The initially planned 'housing development public REIT' method has been abandoned.

According to the real estate industry on the 26th, Korea Land and Housing Corporation (LH) plans to announce the sale of Gwacheon Jijeongta S-2 Block (33,004㎡), where 783 housing units with a net area of 60㎡ or less can be built, sometime in October. Pricing and other preparations are currently underway.

Earlier, LH announced at the end of March this year that the S-2 Block would be developed and sold through a housing development public REIT method and received letters of intent from April 18 to 20. However, no one responded, and despite two more attempts, it was ultimately reported to have failed. The plan was to select a preferred negotiator in July and establish the REIT in September.

The housing development public REIT is based on the 'Improvement Plan for the Supply System of Multi-family Housing Land' announced by the Ministry of Land, Infrastructure and Transport in 2020, aiming to share the development profits generated from housing sales projects with the public.

The basic framework is that construction companies and financial firms form a consortium to establish a REIT (Real Estate Investment Trust), which then purchases LH multi-family housing land to build and sell houses. However, there is a difference in expanding the proportion of public stock offerings to the public during capital raising.

LH explained, "The timing of the public offering coincided with the steel and concrete shortage period, and as interest rates rose and the real estate market entered a downturn, bidding was sluggish."

So far, Gwacheon Jijeongta has been spotlighted as one of the few undeveloped areas in Gwacheon, known as a quasi-Gangnam district. As development became a reality, apartments were supplied at prices lower than surrounding areas, causing a 'lottery' frenzy.

In fact, ▲S-1 Block Gwacheon Prugio Ortus ▲S-4 Block Gwacheon Prugio La Bien O ▲S-5 Block Gwacheon Le Scento Desiang ▲S-6 Block Gwacheon Prugio Bellarte recorded average subscription competition rates of hundreds to one and completed private sales. Public sale complexes such as ▲S-8 Block Gwacheon Knowledge Information Town Linfamilier and ▲S-9 Block Gwacheon Jade Zai also attracted strong interest.

However, Gwacheon Jijeongta is expected to find it difficult to avoid the shadows of rising interest rates and recession. In particular, S-2 Block is criticized for being disadvantageous in terms of profitability due to its small size and fewer households. A construction company official said, "It is uncertain whether private developers will actively participate in times like these."

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