When Reconstruction Charges Are Eased, Nationwide Levy Complexes Decrease by 40%... Seoul Complexes Drop from 40 to 33

When the exemption threshold for the reconstruction excess profit charge is raised from 30 million won to 80 million won, the number of reconstruction complexes subject to the charge nationwide decreases from 111 to 67. The average charge amount (based on the scheduled amount, without applying long-term holding) also drops from 88 million won to 48 million won.

Crane operating at a reconstruction complex in Seoul / Photo by Yonhap News

On the 29th, the National Assembly Land, Infrastructure and Transport Committee held a bill review subcommittee and passed the amendment to the "Act on the Recovery of Reconstruction Excess Profits" (Reconstruction Excess Profit Recovery Act), raising the threshold for imposing the charge to 80 million won and increasing the applicable charge rate range from 20 million won to 50 million won.

In this regard, the Ministry of Land, Infrastructure and Transport announced that applying the amended Reconstruction Excess Profit Recovery Act would reduce the number of reconstruction complexes subject to the charge nationwide by about 40%.

Looking only at Seoul, the number of complexes decreases from 40 to 33, a reduction of 7, and the average charge amount falls by 32% from 213 million won to 145 million won. As of the end of August this year, the scheduled charge amount notified to 40 reconstruction complex associations in 25 districts of Seoul totaled 2.5811 trillion won.

In Incheon and Gyeonggi, the number of complexes subject to the charge decreases from 27 to 15, and the average charge amount shrinks by 58% from 77 million won to 32 million won. For provincial apartments, the number of complexes subject to the charge drops from 44 to 19, and the average charge amount decreases from 25 million won to 6.4 million won.

However, experts expect that this measure will not significantly boost reconstruction projects.

Lee Eun-hyung, a research fellow at the Korea Construction Policy Institute, said, "Until the previous government, the key to metropolitan area redevelopment projects was permits, but now the critical issue is the additional financial burden capacity of each project association member," adding, "Even if the reconstruction charge is reduced, since it is added to the additional burden, it will not be easy for reconstruction projects to gain momentum."

Yeo Kyung-hee, senior researcher at Real Estate R114, also diagnosed, "The biggest problems in current redevelopment projects are price negotiations, construction cost increases, and interest rate levels," and "Therefore, the ripple effect of easing the Reconstruction Excess Profit Recovery Act will not be significant for complexes currently pursuing reconstruction."

The impact on housing transaction volume and short-term price increases is also expected to be limited. Ham Young-jin, head of the Zigbang Big Data Lab, said, "In reconstruction projects, there are various variables such as regulatory areas, the price ceiling system, land transaction permit zones, project progress speed, construction company brands, base interest rates, and economic fluctuations," explaining this.

However, there is also a prospect that in some areas such as northern Seoul, low-density complexes in the metropolitan area, and provincial complexes, reconstruction may be initiated after calculating the expected charge. This is because the lower the development profit, the lower the charge imposed.

Park Won-gap, senior real estate expert at KB Kookmin Bank, said, "With the passage of the amendment to the Reconstruction Excess Profit Recovery Act, some uncertainties have been removed, so associations are likely to run simulations and weigh the costs and benefits," adding, "For high-priced complexes in Gangnam with large development profits, there is a difference between expectations and the degree of easing, so the effect on development activation is expected to be limited, and some complexes may be waiting for further easing of the Reconstruction Excess Profit Recovery Act."

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