In major redevelopment and reconstruction bidding wars in Seoul, the so-called "0·0·100" terms—under which unions pay none of their assessed contributions during construction and instead pay the full amount at move-in—are appearing one after another. Some business sites have pushed the payment date back as far as four years after move-in. As construction costs rise and lending regulations tighten, increasing the financial burden on union members, builders are highlighting their financing capacity to win votes. However, only the payment timing is delayed; the assessed contribution itself does not decrease, and depending on the financing method, the interest burden may fall on union members.
Typically, union members pay assessed contributions in a down payment, installments, and a final payment after signing the sales contract. Although the ratios and timing vary by business sites, it is common to pay the down payment and installments in parts during construction and settle the balance at move-in.
According to the maintenance industry on the 11th, Bongcheon District 14 in Gwanak-gu, Seoul, where GS Engineering & Construction is the builder, applies "0·0·100" terms, receiving no down payment or installments during construction and collecting the full assessed contribution at move-in. Bongcheon District 14 selected GS Engineering & Construction as the builder in March last year and signed the construction contract in April this year.
In Sindang District 10 in Jung-gu, Seoul, a consortium of GS Engineering & Construction and IPARK Hyundai Development Company offered the same terms and secured the construction rights in July last year.
Similar terms are continuing in reconstruction bidding. Samsung C&T offered conditions for the integrated reconstruction of Shinbanpo 19th and 25th in Seocho-gu, Seoul, for which it secured construction rights in May, to pay the assessed contribution principal in full at move-in with no down payment or installments. Under Samsung C&T's proposed terms, union members would not need to take out assessed contribution loans before move-in.
Recently, competition has also emerged to defer the payment date until after move-in. For the Seongsu District 1 redevelopment in Seongdong-gu, Seoul, which it won this year, GS Engineering & Construction allowed union members to either pay the full assessed contribution at move-in or pay up to four years after move-in.
DL E&C, selected in June as the builder for the reconstruction of Mok-dong Complex 6 in Yangcheon-gu, Seoul, also offered to defer assessed contribution payments for up to four years after move-in. It also proposed to cover a 50 billion won increase in construction cost inflation and to arrange relocation funds up to a 100% loan-to-value (LTV) ratio.
In Hannam District 4 in Yongsan-gu, Seoul, Samsung C&T allowed assessed contributions to be paid at either two or four years after move-in. In Apgujeong District 2 in Gangnam-gu, Hyundai Engineering & Construction proposed terms to postpone assessed contribution payments for up to four years after move-in. The terms also stated that if union members cannot obtain assessed contribution loans from financial institutions, the builder will be responsible for securing the funds. Hyundai Engineering & Construction was selected as the builder in September last year with support from about 90% of union members.
However, the phrase "100% at move-in" does not always mean the same financial structure. If the builder fully secures the project funds corresponding to the assessed contributions and even covers the interest, union members do not need separate assessed contribution loans before move-in. By contrast, under a consumer financing method, the loan is taken out in the union member's name, and the member bears the principal and interest. Who secures funds when loan limits are insufficient or a loan is denied also varies by establishment.
If the government changes lending regulations, existing payment terms may be revised. The reconstruction union for Gil-dong Samik Park in Gangdong-gu, Seoul, where Daewoo Engineering & Construction is the builder, guided members with two or more homes last year to pay the down payment and installments directly instead of "100% at move-in" after regulations on loans to multiple-home owners were tightened.
A construction company official said, "Delaying the payment date for assessed contributions does not reduce the final amount," and added, "If construction costs and financing expenses rise or the proportional rate falls due to project delays, the amount due at move-in may be larger than estimated."