With the government's implementation of loan regulations, the financial burden on both members and actual demanders has increased, creating an atmosphere in which construction companies prioritize financial benefits in the competition for maintenance project contracts. Concerns have arisen in the construction industry that this trend will raise the entry barriers for mid-sized and small construction firms in maintenance projects, widening the gap in contract wins compared to large construction companies.
According to the maintenance industry on the 24th, while construction companies previously set differentiation strategies emphasizing specialized design, high-end brands, landscaping, and community facilities in bidding competitions, they are now highlighting financial benefits. They are entering the bidding process by leveraging their credit ratings or agreements with financial firms, offering low-interest loans, interest-free mid-term payments, and expanded relocation loans.
Currently, in the ongoing competition at Gaepo Woosung 7th in Gangnam District, Seoul, Samsung C&T has promised various financial benefits through its unique AA+ credit rating among domestic construction companies and stable financial strength. This includes an unlimited lowest interest rate for total project expenses, a 100% refund within 30 days after the signing of the contract by members, and a maximum deferral of 4 years for contributions. It also includes all project promotion expenses such as relocation expenses and rental deposit refunds.
Daewoo E&C, which has a relatively lower credit rating (grade A), proposed a funding interest rate for essential project costs of 'CD+0.0%'. They suggested covering all project expenses, including relocation loans (LTV 100%), and would guarantee 1 trillion won in project promotion expenses to enhance business flexibility.
Previously, Samsung C&T successfully won a contract with a remarkable condition of LTV 150% (1.2 billion won), adding 100% to the basic relocation loan LTV of 50% for the redevelopment project in the Hannam 4 area of Yongsan.
The redevelopment project for the YongSan Maintenance Depot District 1 was also successfully won by HDC Hyundai Development Company, which proposed conditions of a basic relocation loan LTV of 50%, an additional relocation loan LTV of 100%, and a minimum relocation loan of 2 billion won.
Construction companies have begun to research proposals for financial benefits rather than focusing solely on specialized design and community facilities. Relocation loans are taken by members participating in reconstruction and redevelopment projects to cover the expenses necessary for moving to a new dwelling during the construction period.
Generally, members utilize relocation loans to find dwellings for rent or to repay existing housing mortgage loans. There are also cases where the loan is used to refund the deposit for tenants residing in existing dwellings.
However, with the government announcement on the 27th of last month regarding household debt management including a restriction of relocation loans to 600 million won for single-home owners, the maintenance business sites are experiencing confusion. For those with multiple homes, the maximum available relocation loan is 0 won. As construction companies have to bear the shortfall from this limitation on relocation loans, their financial cost burden has increased.
A representative from a large construction company noted, "We are thinking more strategically about providing financial benefits" and added, "We are actively progressing with cooperation with financial companies, and most construction companies are strengthening their financial support efforts."
Another construction company representative stated, "There was bleeding competition in the past regarding financial benefits, but we emphasized specialized design, community, brand, etc., to members. However, recently, the interest of members in financial benefits has increased," and added, "The trend of emphasizing financial support is expected to intensify following the loan regulations."
Concerns have been raised that the gap in conditions that can be proposed by construction companies based on their financial capacity will widen, leading to greater polarization in contract wins in maintenance projects between large construction companies and mid-sized and small construction companies. A representative from a mid-sized construction company said, "Recently, the phenomenon of bleeding competition continues with the presentation of excessive additional relocation loans," and added, "Especially in the Seoul region, contract wins are already focused on large construction companies, making it seem like there will be less room for relatively smaller construction companies."