Restarting "Linked Redevelopment Projects" for 40,000 Units... Eased Price Reassessment Requirements and Partial General Sales Allowed

Ministry Implements Follow-Up Measures to the September 7 Housing Supply Plan
If Construction Costs Rise by 20%, Price Recalculation Expands from "Past 3 Years" to "Entire Period"
General Sales Allowed Except for Units from Relaxed Floor Area Ratio

The Ministry of Land, Infrastructure and Transport has decided to partially allow general sales in order to normalize the “publicly supported private rental linked redevelopment projects,” which have been facing difficulties due to a sharp increase in construction costs. In addition, if construction costs have risen by more than 20%, the ministry will now allow the acquisition price of rental housing to be recalculated regardless of the time period, thereby reducing the burden on associations.

On December 8, the ministry announced that it will implement these institutional improvements to ensure the smooth progress of linked redevelopment projects. This measure follows the “Housing Supply Expansion Plan” announced in September and is intended to address on-site challenges where projects have been delayed due to the failure to properly reflect rising construction costs.

Status of Nationwide Linked Maintenance Projects. Ministry of Land, Infrastructure and Transport

In linked redevelopment projects, all units designated for general sale are purchased by rental business operators such as REITs and supplied as private rental housing. This system was introduced in 2015 to promote the redevelopment of aging areas by reducing the risk of unsold units. However, issues have arisen recently because, despite rising construction costs, the sales price of rental housing has remained fixed at the time of project approval, resulting in increased contributions from association members.

To address this, the ministry has first made the requirements for allowing price reassessment more realistic. Previously, after three years had passed since the project implementation approval was announced, only the increase in the construction cost index over the most recent three years was reflected. Going forward, the increase rate over the entire period from the project approval announcement to the request for price reassessment will be applied. If the construction cost index has risen by more than 20% during this period, the price will be reassessed based on the management disposition plan approval, allowing the increased construction costs to be reflected in the price.

To improve the previously blocked profit structure, some general sales will now be permitted. Until now, all units for general sale had to be sold to rental REITs, making it fundamentally impossible to improve profitability through higher sale prices. From now on, a portion of the units can be allocated for general sale. However, the units corresponding to the relaxed floor area ratio must still be supplied as rental housing, thus maintaining the intent of the system.

The ministry expects that these institutional improvements will accelerate the progress of linked redevelopment projects nationwide, covering approximately 40,000 units. Cho Minwoo, Director of the Housing Redevelopment Division at the ministry, stated, “We will ensure the comprehensive reform of the redevelopment project system included in the Housing Supply Expansion Plan (the September 7 measures) is implemented without delay, so that high-quality housing can be supplied quickly in urban areas.”

Status of Publicly Supported Private Rental Linked Redevelopment Projects. Ministry of Land, Infrastructure and Transport

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