Construction Starts Without Land Costs... Package-Type Public Offering Pilot Project in Pyeongtaek Godeok

The government will implement a 'package-type public offering project' that links land supply with public housing construction. This project allows private construction companies to purchase land from the Korea Land and Housing Corporation (LH) at the price excluding construction costs and start construction immediately. It is expected that the financial burden on construction companies will be significantly reduced. The government will begin a pilot project in May in Godeok International New City, Pyeongtaek, Gyeonggi Province.

Pyeongtaek Godeok New Town Package-type Public Project Site. [Image provided by the Ministry of Land, Infrastructure and Transport]

The Ministry of Land, Infrastructure and Transport announced on the 13th that it will implement a 'package-type public offering project' combining land supply and public housing construction. This project allows private developers to start construction without paying the full land cost upfront.

For example, when LH offers private land worth 100 billion KRW, it bundles the construction of public housing worth 90 billion KRW into the public offering. The construction company only needs to pay LH the difference of 10 billion KRW between the land cost and construction cost to proceed with the project immediately. At this time, the construction company first develops private housing by acquiring both private and public housing sites. Then, it uses the revenue from the private housing sales to build the public housing.

Previously, private developers had to pay the full land price before receiving construction funds from LH to build public housing. Because they had to pay a large amount of land cost upfront to start construction, private developers found it difficult to purchase land due to financial burdens.

The package-type public offering project is expected to expand housing supply and shorten the supply period. For private developers, this project reduces the burden of land costs. With eased land cost burdens, private developers can participate more actively in projects. Also, since private developers can enter projects with lower costs, the supply period can be accelerated.

However, if private housing sales are sluggish, public housing construction may face difficulties. This is because public housing construction in the package-type public offering project is based on the proceeds from private sales. Nevertheless, the Ministry of Land, Infrastructure and Transport states that there will be no issues in public housing construction by issuing construction performance bonds. If the land cost is 100 billion KRW and the public housing construction cost is 90 billion KRW, LH only receives the 10 billion KRW difference between the land and construction costs. At this time, LH issues construction performance bonds for the remaining 90 billion KRW land cost to ensure the supply of public housing.

Package-type Public Project Model Structure Diagram. [Image provided by the Ministry of Land, Infrastructure and Transport]

The Ministry of Land, Infrastructure and Transport will conduct a pilot project in May in Godeok New City, Pyeongtaek. Godeok New City in Pyeongtaek has high housing demand due to the extension of the metropolitan express railway (GTX) A and C lines and the construction of Samsung Electronics' Pyeongtaek campus. The ministry stated that through this project, it will supply 12,000 public housing units in Godeok New City, Pyeongtaek. Depending on the success of this pilot project, the ministry plans to expand this type of project to other areas such as the 3rd New Towns.

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