The modular construction industry is gaining attention as a solution to the climate change crisis, strengthened construction safety management, and the aging construction workforce. However, there are calls for institutional support, such as enhanced incentives, to address the issue of high construction costs compared to traditional construction, which makes it difficult for construction companies to enter the market.
Professor Jang Hyeong-je of Hanyang University's Department of Smart Convergence Engineering noted during the 'Seminar on Activating Sustainable Modular Construction Industry for Climate Change Response' held in the 8th Seminar Room of the National Assembly Building in Yeouido, Seoul, at 10 a.m. on the 24th, that 'the domestic construction industry is suffering from deteriorating labor productivity, an aging workforce, and a shortage of construction workers,' stating, 'Utilizing modular construction can not only reduce carbon emissions but also allows buildings to be constructed regardless of weather conditions and site conditions, while minimizing safety-related issues through standardization and automation, ultimately reducing the potential for defects and maintenance costs.'
The domestic modular market size grew 14-fold from 12.3 billion won in 2018 to 175.7 billion won in 2022. It is expected that the market will expand to 2 trillion won by 2030. However, in comparison to the overseas modular market, which is expected to expand to 337 trillion won by 2030, the domestic market size is only one-200th of that.
Professor Jang stated, 'We have been trying to activate the modular construction industry in Korea for several years, but the scale of the domestic industry is vastly insufficient compared to overseas.' He analyzed that 'investors are hesitant because they believe there is no business viability compared to the cost involved in building modular houses in the domestic construction market.'
Professor Jang Hyeong-je proposed measures to activate the domestic modular construction industry, including creating a conducive business environment, establishing incentive criteria, and improving procurement methods.
Professor Jang stated, 'To boost the modular housing construction industry, it is necessary to expand the amount ordered by creating dedicated public land.' He added, 'It is also essential to establish incentive criteria that consider the modular structure's unique characteristics requiring manufacturing, transportation, and installation.' Furthermore, he pointed out, 'When manufacturing modular housing, it is practically difficult and inefficient to separate procurement for electrical, information communication, and fire facilities, which must be installed simultaneously at the factory.' He also noted, 'Even when a construction company proposes modular methods to shorten the schedule, it usually opts for conventional methods because there is no standard cost-related to modular methods, making it difficult to budget total project costs.'
In the construction industry, opinions have emerged about the need to improve financial support, advance payments, and the recognition methods for completed work for modular manufacturing.
Kim Dong-hyeok, Head of Team at GS Engineering and Construction, stated, 'When manufacturing modular components, the high initial capital outlay for material orders worsens cash flow,' adding, 'We need to improve the existing system that only recognizes payment for completed work at the installation site by allowing it to be recognized based on the progress of manufacturing at each stage.'
Kim continued, 'Setting up and operating a modular manufacturing plant requires significant funds, creating high entry barriers, so we need to explore ways to provide low-interest financial support using factory facilities and receivables as collateral.' He added, 'To promote modular manufacturing, a system is needed to confirm designs before production, allowing the manufacturing process to proceed without additional supervision if certification is received, thereby enhancing manufacturing competitiveness.'
The Ministry of Land, Infrastructure and Transport is also aware of the importance of the modular construction industry and has announced that it has begun research and development related to this field. The ministry has currently issued a request for proposals for research to build 3,000 rental units using the modular construction method over five years from next year until 2030, and 5,000 rental units after 2030.
Jin Heon-min, Deputy Director of the Housing Construction Supply Division at the Ministry of Land, Infrastructure and Transport, said, 'Although it hasn't surfaced yet, there is a serious manpower problem on construction sites.' He added, 'Singapore is increasingly opting for off-site construction (OSC) due to its own labor shortages, and Korea must pro-actively respond to this issue as well.'
Deputy Director Jin emphasized, 'Over 99% of the domestic construction industry is still site-based, and modular construction accounts for a very small proportion.' He stated, 'To change this system, we are looking into various ways to provide incentives from the public sector for building coverage ratios and floor area ratios, and to address the significant expense of more than 30% compared to on-site construction, which is deterring private sector involvement.'