As instability in the real estate market persists, a plan for the Korea Land & Housing Corporation (LH) to take back sites in the third phase new towns that it sold to the private sector and supply dwellings is being discussed by the government and the ruling party. The idea is for LH to retrieve public housing sites that private builders purchased but have not broken ground on due to profitability concerns, build apartments, and ease the shortage of dwelling supply.
According to the government, the National Assembly, and the construction industry on the 30th, the ruling party is reviewing a plan for LH to reclaim third phase new town sites sold to the private sector. This follows a comment by a Democratic Party of Korea policy committee official on the 21st who said, "We are also considering a method in which LH retrieves improperly managed private sites that it approved and has LH build directly." The ruling party believes such measures could enable the supply of dwellings for more than 10,000 households.
The reason a plan to take back sites sold to the private sector is being reviewed is the perception that private builders, amid a slump in the real estate market, are buying public housing sites but not building dwellings. This aligns with the recent backdrop for the government pushing LH to supply dwellings through direct implementation.
If the retrieval of private-sector sites in the third phase new towns materializes, the sites most likely to be taken back are those where private builders have not yet paid the remaining balance. For sites where the balance has not been paid and the transfer of title has not been completed, the contract can be canceled if certain conditions are met. An LH official said, "If only the down payment has been made and the interim payment is in arrears, and the arrears interest exceeds the down payment, the conditions for termination are met," adding, "If a notice of event of default (EOD) is received from a financial institution, the contract can be terminated."
ChosunBiz's analysis of LH notices found that among the third phase new towns, there are a total of 22 plots where private builders purchased land but have not paid the balance. The supply area is 839,695 square meters, and the supply amount is 4.6046 trillion won. This is about 10% of the total dwelling construction land in the third phase new towns. There are eight plots each in Namyangju Wangsuk and Incheon Gyeyang. There are three each in Bucheon Daejang and Goyang Changneung, and one in Hanam Gyosan. If these sites are developed, it is expected that dwelling supply for around 10,000 households would be possible.
However, in the case of these sites, private builders are paying the interim payments without arrears, making it unlikely that the government can unilaterally terminate the contracts.
If the policy were to proceed in the direction of retrieving even sites whose sale to the private sector has been fully completed, a stumbling block could be the potential gap between the price at which LH sold them in the past and the expense required to buy them back.
The government and LH say they are not yet considering a plan to retrieve sites sold to the private sector. Instead, they plan to provide dwelling construction incentives by offering a firm commitment to purchase unsold units if private developers in public housing sites across the greater Seoul area, including the second and third phase new towns, break ground early by next year. An official at the Ministry of Land, Infrastructure and Transport (MOLIT) said, "We have not yet heard anything related from the party," adding, "For now, we are announcing incentives to induce private builders to start dwelling construction early and expanding funding support." Another government official noted, "To retrieve land sold to the private sector, measures such as legal revisions may be necessary."
The construction industry reacted positively to the fact that such a plan is under review. A construction industry official said, "There are quite a few builders that would rather cancel contracts than develop the public housing sites they purchased," adding, "If the government says it will take the land back in such cases, they would welcome it." The official added, however, "Since LH has decided not to sell public housing sites anymore, companies that are waiting a bit to proceed with their projects could push back."