GS Engineering and Construction requested an additional construction cost of approximately 490 billion won from the 'ShinBanpo 4 District Reconstruction Project (Maple Jae)' union ahead of its scheduled occupancy in June. Among this amount, it filed a lawsuit in court for a construction cost increase of 257.1 billion won related to financing costs and inflation. The union and GS Engineering and Construction failed to narrow their differences regarding construction costs and requested mediation from the Seoul city government.
If the construction cost dispute continues, the possibility of a delay in the occupancy of Maple Jae cannot be ruled out. Maple Jae is a large complex with a total of 3,307 units, and if the occupancy is delayed, significant impacts on the rental market in the Banpo area are expected.
According to the construction industry on the 10th, GS Engineering and Construction requested the union for an additional construction cost of 486 billion won last December. They requested an additional contribution of 150 million won per member. The justification for the increased construction cost includes an additional construction cost of 228.8 billion won due to design changes and specializations, and 257.1 billion won due to changes in the business plan, period, and construction environment (financing costs, etc.).
GS Engineering and Construction filed a construction price lawsuit at the Seoul Central District Court on December 6 of last year regarding the additional construction cost of 257.1 billion won due to financial costs. The union rejected it on the grounds that it violated the original 'Joint Business Execution Agreement' or lacked basis. GS Engineering and Construction appointed 'Kim & Chang' law firm, the largest law firm in Korea, as its legal representative for the lawsuit.
The additional construction cost of 257.1 billion won consists of: ▲ 31 billion won for inflation prior to commencement based on the agreement, ▲ 96.7 billion won for reflecting changes in the construction environment, ▲ 18.5 billion won for financial costs due to an increase in the business period, ▲ 77.7 billion won for increased contributions due to a decrease in the number of units for general sale, and ▲ 33.2 billion won for general management fees and profits related to increased construction costs compared to bids.
A union official said, "There is no basis for all five items requested by the construction company under the name of financial costs and so on amounting to 257.1 billion won."
Regarding the additional construction cost of 228.8 billion won due to design changes and specializations, the union requested verification from the Korea Real Estate Board. GS Engineering and Construction initially requested 123.4 billion won in the same name last October, then increased it to 228.8 billion won in December when providing detailed figures.
This is the second time GS Engineering and Construction has requested an increase in construction costs from the ShinBanpo 4 District Reconstruction union. In 2023, GS Engineering and Construction demanded an increase from the initial contracted construction cost of 935.2 billion won to 1.4 trillion won. At that time, with growing concerns over construction stoppage, the union agreed to increase it by 198 billion won. The remaining construction cost increase of 318 billion won was verified by the Korea Real Estate Board, which determined that 218.6 billion won was appropriate for additional construction costs due to design changes. At that time, the Korea Real Estate Board did not conduct verification regarding inflation or financing costs. GS Engineering and Construction has also requested to extend the completion date, which was originally August 2024, to April this year and then to December this year. Ultimately, GS Engineering and Construction decided on June of this year as the completion date through discussions with the union.
As litigation over construction costs unfolds ahead of occupancy, voices of concern arise in the industry. The union and GS Engineering and Construction have requested the Seoul city to dispatch coordinators to propose a mediation plan. Some are criticizing GS Engineering and Construction for allegedly employing a 'brinkmanship tactic' to secure additional construction costs just before occupancy. GS Engineering and Construction recently requested an additional construction cost of 103.2 billion won from the 'Cheolsan Jugong 8·9 Complex Housing Reconstruction and Maintenance Project (Cheolsan Jae The Heritage)' union, four months before occupancy, resulting in further conflict.
An industry official noted, "Typically, when one household moves, 3 to 4 households will move in succession," adding, "If the occupancy of the over 3,300-unit 'Maple Jae' is delayed, it could affect more than 10,000 households in the Banpo area."
A GS Engineering and Construction official said, "We billed the union for the additional construction costs incurred due to design changes, application of specialization, changes in the business plan and business period, and changes in the external construction environment," and added, "We will diligently negotiate to resolve this amicably with the union before occupancy with the help of the Korea Real Estate Board and Seoul city coordinator system."