Hyundai Engineering & Construction is in conflict with the Gwangcheon-dong redevelopment association in Seo-gu, Gwangju, over sales prices. The association argues that it should raise the general pre-sale price to lower members' burdens while reducing construction costs. In contrast, Hyundai Engineering & Construction, concerned about potential unsold units in a complex applying the high-end brand THE H, is demanding guaranteed construction costs and a cut in the general pre-sale price. Hyundai Engineering & Construction has proposed a premium brand plan in addition to the high-end brand to negotiate with the association.
According to the maintenance industry on the 4th, Hyundai Engineering & Construction sent an official letter to the Gwangcheon-dong redevelopment association in Gwangju on the 27th and proposed a plan to apply a premium brand.
The Gwangcheon-dong redevelopment project in Gwangju will build about 5,000 households on approximately 425,368 square meters in Gwangcheon-dong, Seo-gu, Gwangju. The project cost is expected to be in the mid-2.9 trillion won range based on THE H construction, and it is cited as the largest among private redevelopment projects in Gwangju. After designation as a maintenance zone in 2012, it received approval for association establishment in 2015, project implementation in 2019, and management and disposal in 2023.
Currently, the business site has differences between the association and the contractor over the general pre-sale price and construction costs. The association, to reduce members' burdens, argued for an average general pre-sale price of 26.5 million won per pyeong, but Hyundai Engineering & Construction believes the price should be lowered further to 24.02 million won. In recent negotiations between the association and Hyundai Engineering & Construction, the company strongly demanded applying a general pre-sale price around 24.02 million won, leading to expectations that the general pre-sale price will likely be lowered. For construction costs as well, Hyundai Engineering & Construction is requesting around 7.91 million won per pyeong. In contrast, the association is said to be trying to hold the line in the 7.8 million won range.
Typically, redevelopment projects seek to raise general pre-sale prices to maximize profits for the contractor and the association. However, Hyundai Engineering & Construction, amid a severe unsold housing situation in the provinces, is concerned that if the project's general pre-sale price is raised, unsold units could occur for the high-end brand THE H. Last month, the total number of unsold dwellings nationwide was 66,576, of which 48,695 were concentrated in the provinces.
The association also recently explained to members, "The biggest stumbling blocks in the negotiations were 'the provincial market and Gwangju market, which have not emerged from the slump,' and 'Hyundai Engineering & Construction's efforts to defend against the unsold risk for the THE H brand.'"
In the end, it was confirmed that Hyundai Engineering & Construction sent an official letter to the association on the 27th proposing the application of a "premium brand." Instead of creating a new premium brand between THE H and the general housing brand "Hillstate," it is said to be highly likely to propose a Hillstate+α brand.
The association recently said, "If Hyundai Engineering & Construction proposes a separately suggested premium brand at a lower construction cost, additional charges could be significantly reduced. Therefore, when placing an item on the agenda for the general meeting, do not submit only the THE H plan that has been finalized through consultation. Also add the premium brand plan that Hyundai Engineering & Construction will finalize and propose in the future, and submit it so that one of the two plans can be selected."
An official at Hyundai Engineering & Construction said, "If the THE H brand is applied, there are design conditions that must be reflected, but the association is requesting changes to design elements that could lower the unit construction cost," adding, "If we match the (unit price the association wants), we cannot attach THE H, so we sent a (premium brand) design plan that lowers some construction costs instead." The official also said, "Aside from THE H and Hillstate, there is nothing else under preparation."
However, it is uncertain whether the association will accept Hyundai Engineering & Construction's premium brand application plan. The association recently notified members, saying, "In negotiations with Hyundai Engineering & Construction, we did not even review brands other than THE H, nor did we bring them to the negotiating table," and "the final negotiation plan has been set as THE H." The association is expected to hold a general meeting and, after presenting Hyundai Engineering & Construction's proposal, decide the project's direction.