Reselling Apartment Sites Fronted by Paper Companies Becomes More Difficult

[Asia Economy Reporter Moon Jiwon] From now on, multi-family residential sites within public housing land supplied through a lottery system will be prohibited from resale even after two years from the contract date.

Additionally, if a person who has been supplied with a multi-family residential site intends to resell the land to a project financing vehicle (PFV) for housing business purposes to raise funds, they must secure a majority stake in the PFV.

The Ministry of Land, Infrastructure and Transport announced on the 25th that it will publicly notify on the 26th a partial amendment to the Enforcement Decree of the "Land Development Promotion Act" and the "Special Act on Public Housing" reflecting these provisions.

Until now, multi-family residential sites within public housing land could be resold below the supply price without restrictions after two years from the contract. However, some construction companies exploited this regulation by using paper companies to preempt land and then reselling it to their parent or affiliate companies.

Accordingly, the government has strengthened regulations to prohibit resale below the supply price even after two years from the supply contract, except for reasonable reasons specified by law such as bankruptcy, and to prevent resale until ownership registration is completed.

The government also tightened the conditions for PFV resale. Currently, resale to a PFV is allowed to support financing when the recipient of the multi-family residential site is the largest shareholder of the PFV, but there have been many abuses where affiliates of other corporate groups secured majority shares to effectively control the PFV.

Therefore, the amendment stipulates that resale to a PFV is only permitted when the land recipient holds a majority stake in the PFV.

The Ministry of Land plans to monitor the utilization and actual use of the system by the private sector for one year after the improvement and will consider additional measures such as abolishing the PFV resale special system if necessary.

Furthermore, if there is a history of sanctions such as business suspension due to violations of laws including the "Housing Act" during housing and construction project implementation, priority supply of multi-family residential sites will be restricted.

Kim Younghan, Director of Land Policy at the Ministry of Land, emphasized, "Through this system improvement, acts that disrupt the supply order of public housing land, such as bidding using paper companies by some construction firms, will be blocked, and the public housing land supply system is expected to be centered on actual demanders."

The Ministry of Land plans to continuously pursue additional system improvements, such as strengthening bidding requirements for multi-family residential sites in speculative concern areas, if necessary.

Among these system improvements, the amendment to the enforcement decree will undergo a public notice period from the 26th until April 8, followed by consultations with related agencies, review by the Ministry of Government Legislation, and the Cabinet meeting, and is scheduled to be implemented within the first half of the year.