"Mapo Zai Hillstate" Sale Postponed... Association and Contractor Struggle to Agree on Construction Cost Increase

Gongdeok 1 District Planned for General Sale in November
Construction Report Not Filed Since 2018 Management Disposition Approval
Contract Allows Construction Cost Increase Reflecting Inflation
Difficulty in Negotiation Due to Different Inflation Indexes

'Mapo Xi Hillstate (Gongdeok 1 District)' bird's-eye view / Photo by Seoul City Maintenance Project Information Center

[Asia Economy Reporter Hwang Seoyul] The sales schedule for ‘Mapo Xi Hillstate (Gongdeok 1 District)’, which was planned to be supplied this November, has been postponed to next year. This is because the construction start report has not yet been submitted due to differences in views between the contractor and the association regarding the criteria for construction cost increases.

According to the maintenance industry on the 18th, the sales schedule for ‘Mapo Xi Hillstate (Gongdeok 1 District)’, which was planned for general sale in November, has been delayed. The Gongdeok 1 District association completed relocation and demolition after receiving management disposition approval in April 2018, but has not yet submitted the construction start report to Mapo District Office. ‘Mapo Xi Hillstate’ is a complex created through the reconstruction project of Gongdeok 1 District located in Gongdeok-dong, Mapo-gu, Seoul, with GS Construction and Hyundai Construction as the contractors. It is planned to be built with 10 buildings, 1,101 households, from 4 basement floors to 22 above-ground floors.

The main reason for the schedule delay is the failure to reach an agreement on changes to the contract between the contractor and the association. According to the contract between the contractor and the association, if construction is delayed for a certain period, construction costs can be increased reflecting inflation. A representative from the association said, "The gap between the cost increase the contractor is considering and the cost the association is considering is too large."

Location map of Gongdeok 1 District / Photo by Seoul Metropolitan Government Urban Renewal Information Center

This is because the indices each party uses as the basis for inflation differ. The contractor claims the Construction Cost Index, while the association insists on the Consumer Price Index. The Construction Cost Index is created by the Korea Institute of Civil Engineering and Building Technology to estimate price changes in detailed input resources such as materials, labor, and equipment for direct construction costs. The Consumer Price Index measures the overall price level trends for various goods and services purchased for consumption purposes.

For example, comparing the rate of change in each index as of last August to the same month in 2020, the Consumer Price Index rose by 8.41%, but the Construction Cost Index increased by 24.80%. Due to the sharply rising Construction Cost Index compared to the Consumer Price Index, the construction cost per pyeong estimated by the association differs by about 1 million KRW. A representative from the association explained, "Approval from the association members is required for the construction cost increase to pass and proceed to the next step. If the amount becomes too large, the members’ contribution will also increase, so it may be difficult to get approval."

The association expects the sales schedule to be after mid-next year, but the specific timing may change depending on the progress of negotiations.

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