The office building conversion work for residential-type accommodation facilities (known as 'saengsuk') is accelerating. According to the construction industry on the 10th, Hanwha's construction division is conducting a procedure to obtain consent forms from buyers for the conversion of the 'Hanwha Foreena Cheonan Asan Station' saengsuk into office use.
In addition, it is reported that 'Lotte Castle Le West' and 'Hillstate Cheongju Central' are also in the process of conversion. Applications for changes in the use areas of saengsuk in the Songdo area, which were overseen by the Incheon Free Economic Zone Authority, are also underway.
Saengsuk was first introduced as accommodation facilities with cooking facilities back in 2012 in response to the increasing tourism demand from long-term foreign residents, through revisions to the public health management law. As there was no need for a subscription bankbook, and there were no restrictions on resale or additional taxation for comprehensive real estate tax and capital gains tax, there was significant speculative demand aiming for short-term gains during the period of rising real estate prices. The Ministry of Land, Infrastructure and Transport also recognized these issues and revised the building law enforcement ordinance in 2021 to prohibit residential use of saengsuk.
After the prohibition of residential use of saengsuk, efforts were made to convert it to office usage. However, it has been difficult to meet safety standards, and the conversion involves processes such as changes to detailed district plans and public contributions, making the transition challenging. Cases have also arisen where some investors in saengsuk, unable to make the conversion, have initiated lawsuits against the implementing company.
The Ministry of Land, Infrastructure and Transport has established a grace period during which no fines will be imposed for illegal residential use when changing to residential-type office buildings and has prepared a revision of building standards to support the conversion of saengsuk to office use by removing restrictions on the area of floor heating in office buildings. It also proposed measures to establish saengsuk support centers in local governments or designate dedicated personnel to actively assist in changes to detailed district plans and conversions.
In the National Assembly, a proposed amendment to the 'Act on the Distribution of Buildings' was introduced, lowering the required rate of consent for use changes for saengsuk before completion from the current 100% to 80%. A construction company official noted, "It is practically impossible to obtain consent from 100% of buyers for saengsuk before completion," adding, "If the amendment passes, the conversion of saengsuk will proceed at a faster pace."
However, confusion still arises regarding the entities and scale of public contributions during the conversion process, leading to difficulties in the transition. In the case of Magok Le West, the city of Seoul allowed changes to the detailed district plan on the condition that the implementing company bears the contributed acceptance expense of 20 billion won required for securing parking lot land.
Experts pointed out the need for guidelines on public contributions related to contributed acceptance. Go Jun-seok, a professor at Yonsei University, commented, "It is difficult to determine how to assess public contributions as it is hard to secure spaces like parking lots or community centers for saengsuk that have already commenced construction. Ultimately, buyers will have to bear additional burdens," and added, "If the government provides guidelines on how to assess the scale of public contributions based on the area distributed and the number of households, it could prevent confusion and resolve the conversion issues more quickly."