[Issue] Gwangcheon-dong Redevelopment in Gwangju: Intensifying Standoff Over Construction Costs and Sales Prices... Construction Delayed for 13 Years

On the 8th, a notice reading "No Access to Dangerous Buildings" was posted on the wall of the redevelopment area in Gwangcheon-dong, Seo-gu, Gwangju. This site is a project worth approximately 3 trillion won and is planned to be developed into a complex of about 5,000 households, including apartments up to 45 stories high, auxiliary facilities, and parks. Photo by Song Bohyun

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On the morning of December 8, the redevelopment site in Gwangcheon-dong, Seo-gu, Gwangju, was shrouded in silence. Most residents had already left the area slated for demolition, leaving it eerily quiet. The old row houses and multi-family alleys stood empty, with only rusted gates remaining on vacant homes. Notices announcing "Relocation of Residential Tenants" were posted on walls and utility poles. Despite being the largest redevelopment site in Gwangju, planned for 5,000 households, the area remains at a standstill in silence.

A cooperative member encountered at the site that day lamented, "It took years just to get to this point, but now everything is halted again due to construction cost issues." He added, "Hyundai is saying they will increase the construction cost by 680 billion won, but the basis or breakdown has not been disclosed. If the burden on cooperative members becomes greater than the general sales price, who would accept that?" He continued, "That is why the site is stuck in this state. People have left, but work cannot move forward, so it is silent."

According to The Asia Business Daily’s coverage on December 9, this project has been delayed for 13 years since its designation as a maintenance zone in 2012. The cooperative was approved in 2015, the project implementation was authorized in 2019, and management and disposal approval was granted in 2023. However, the termination of the previous contractor in 2021 and the selection of a new contractor in 2022 led to further delays.

Until recently, lawsuits over occupants on the site continued, but in September, the Gwangju District Court ruled in favor of the cooperative’s real estate delivery lawsuit, paving the way for demolition. In October, the city of Gwangju designated this area as the first special construction zone in the region, easing building coverage and floor area ratio regulations. However, negotiations over construction costs and sales prices have stalled, leaving the project schedule uncertain. The cooperative aims to begin demolition this year, start construction in the second half of next year, and complete the project by the end of 2029.

The cooperative explains that when the provisional contract was signed in 2023, they agreed on a construction cost of 5.88 million won per 3.3 square meters. However, Hyundai recently proposed 7.26 million won per 3.3 square meters (totaling 680 billion won), and the cooperative has demanded the basis for this significant increase, insisting that no documentation has been provided. In sales price negotiations, Hyundai Engineering & Construction cited unsold unit risks and proposed around 24 million won per 3.3 square meters, while the cooperative is holding firm at 28.5 million won, resulting in a standoff.

A cooperative official stated, "What matters now is negotiation, not emotions. If they demand an increase without grounds, the burden on cooperative members only grows." He added, "We have met more than ten times, but without a breakdown, discussions are difficult. The project was planned to a high-end standard, but a structure where only the conglomerate profits and the cooperative members bear the burden is unacceptable." He also emphasized, "Objective data is needed to persuade cooperative members, and we have no intention of halting the project."

Opinions among cooperative members are also becoming more divided. One member said, "We need to know how price increases were calculated. If the cooperative sales price exceeds the general sales price, it is unacceptable." Another member remarked, "There is a lot of talk about why even a provisional contract is not being honored. Initially, there was a spirit of negotiation, but now many feel that things have gone too far." He added, "We would prefer to work with Hyundai if possible, but we cannot wait indefinitely. The fact that we are even considering collective action, such as visiting the headquarters to protest, shows how desperate the situation is."

Aerial view of the redevelopment and maintenance project in Gwangcheon-dong, Seo-gu, Gwangju. Provided by Hyundai Engineering & Construction

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Hyundai Engineering & Construction explained the background for the proposed increase in construction costs, stating, "Since the contractor was selected in 2022, the construction environment has changed dramatically, with sharp rises in raw material prices and labor costs expected through the actual construction start in 2026 and beyond. Adjustments reflecting market conditions are unavoidable."

Regarding the controversy over disclosing the calculation data for the increase, the company said, "Since sending an official letter regarding construction costs in July this year, we have presented details of increases and reasons for changes in writing and presentation materials during nine rounds of negotiations." However, regarding the detailed breakdown requested by the cooperative, they stated, "Since the contract is based on a lump-sum bidding method, we are not required to submit itemized details separately. Still, if a construction cost verification process is required under the Urban Maintenance Act, we are willing to provide detailed data."

On the progress of negotiations, Hyundai Engineering & Construction said, "We have conveyed that it is possible to negotiate through value engineering (VE) and adjustments to finishing materials in the construction cost area. We will continue to work toward an amicable agreement with the cooperative."

Regarding the possibility that delays in negotiations could push back the cooperative's target of starting construction in the second half of next year, the company stated, "We are doing our best in negotiations with the cooperative and have no plans to change the construction start date."

On the criteria for applying high-end standards, Hyundai Engineering & Construction explained, "The headquarters brand review committee comprehensively evaluates various factors such as the location, business feasibility, and symbolic value of the complex. Local symbolic value and project conditions are among the considerations."

A real estate industry official in Gwangju diagnosed the conflict as "not merely a price dispute but an issue of institutional and market structure." Park Haein, CEO of Haein Real Estate, said, "While it is understandable that the contractor is demanding an increase due to rising construction costs, a combination of factors is at play: the mismatch between sales market conditions and expectations for location and brand, and the mechanism of passing redevelopment costs on to cooperative members. This is a contemporary problem where structural issues overlap with individual disputes."

Regarding the outlook for negotiations, he said, "Hyundai Engineering & Construction’s desire to avoid unsold unit risks and the cooperative’s focus on profitability and protecting members’ interests make total concessions difficult. However, since both sides would incur significant losses if construction is delayed, realistically, a compromise is likely. The negotiation skills of the cooperative president will be crucial."

On the possibility that construction costs are finalized as proposed by Hyundai, he analyzed, "It is almost certain that the cooperative sales price (member contribution) will exceed the general sales price. With a decrease in general sales prices and an increase in construction costs, the burden on cooperative members will rise. If the construction cost increases by 600 to 700 billion won, each cooperative member could face an additional burden of about 150 million won."

Regarding rumors among some cooperative members about selling if additional contributions become too large, he noted, "Until last year, there were transactions with a premium of over 200 million won, but due to demolition delays and media reports, transactions have slowed. However, there has been no increase in listings or negative premiums. It is unlikely that cooperative members who have waited more than ten years will give up the location and scale of the project."

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