KRIHS: Land Use Rights Should Be Allowed for Urban National and Public Land Development to Secure PF Collateral

Restrictions on Sale, Lease, and Development Hinder Private Participation
Conditional Sale and Guaranteed Operation Period Needed
Introduction of Differentiated Rents by Location and Business Type

An analysis has found that, in the development of national and public land within urban areas, it is institutionally necessary to allow land use rights (such as superficies rights) to secure project financing (PF) loan collateral and to ensure stable business rights for private entities.

On August 12, the Korea Research Institute for Human Settlements stated in its publication "Land Policy Brief: Issues and Policy Tasks for Three-Dimensional Utilization of National and Public Land" that, as the value of urban areas with existing infrastructure rises, there is an increasing need to develop national and public land (which accounts for 34.1% of the national territory) vertically for uses beyond public facilities. The institute pointed out that, although it is necessary to utilize upper and lower spaces through complex development, the Public Property Act fundamentally restricts the sale, lease, and development of such land, making private sector participation difficult and the permitted regulations irrational.

Cases of Three-Dimensional Utilization of National and Public Land by Type. From left to right: Cheongju Express Bus Terminal (Sale Type - Land sold and invested to private sector), Seoul Station Private Investment Station (Lease Type - National and Public Land), Geumgok and Yangjeong Administrative Welfare Centers (Development Type - General Property Partial Sale and Joint Ownership Possible). Provided by Korea Research Institute for Human Settlements

The research team first analyzed case studies of national and public land utilization by sale type, lease type, and development type to identify problems with the current system. In the sale type, even when land is sold for complex development on the condition that public facilities are operated, once the private sector sells off part of the facilities, the contract termination clause becomes effectively meaningless, making it difficult to secure public interest. In the lease type, when land such as railway sites is leased to the private sector, the same lease period and rate are applied regardless of investment size or revenue, undermining business stability. In the development type, private entities have been unable to establish land use rights such as superficies or mortgage rights necessary for PF loans on national and public land, resulting in almost no private-led development.

The researchers argued that institutional reforms are needed to enable complex development and shared use of upper and lower spaces of national and public land in urban areas together with the private sector. Although the value of urban areas with existing infrastructure is increasing, the current legal framework restricts all forms of sale, lease, and development, hindering private participation and slowing project progress.

The research team suggested that, for public facilities donated by the private sector in complex developments to be operated stably, both the sale conditions and operational plans must be stipulated from the outset. Currently, only a special clause allows contract termination if conditions are not met, so if part of the building is sold, there is no way to prevent the loss of public interest. The researchers advised that, in exchange for transferring public facilities to the state, the private sector should be allowed to use the facilities free of charge during the operation period, and that these facilities should be designated as urban or county planning facilities to ensure they continue to serve public purposes.

Land Ownership Status by Entity as of Last Year. Provided by Korea Research Institute for Human Settlements

The lease method also requires reform. Applying a single rate based on the officially assessed land value, as is currently done, does not reflect the scale of investment or the characteristics of each business type. For sites such as unused railway land or land near stations that require private investment, the appraised value should be used as the basis, and differentiated rates should be applied according to the profitability and location conditions of each business type. The research team also noted that linking building rent to net sales could encourage long-term investment.

The most notable point is the allowance of land use rights in development-type projects. Currently, it is difficult for the private sector to secure collateral necessary for PF loans, as it is not possible to establish private rights such as superficies or mortgage rights on national and public land. The researchers analyzed that, if superficies rights are exceptionally allowed in specific zones, such as "three-dimensional complex urban planning districts," private capital could be attracted and stable operation of upper-level facilities could be achieved. However, to prevent infringement of state ownership, they recommended that the scope of permission be limited to areas where urban planning management is possible.

This proposal aligns with the Lee Jaemyung administration's policy direction of "maximizing the use of available land within urban areas." The government plans to accelerate complex urban development by utilizing private capital and technology, moving away from a model in which the public sector takes the lead in all aspects.

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