[Asia Economy Reporter Lee Chun-hee] Although the government invested 18 billion KRW to introduce an electronic contract system for real estate transactions, it has been revealed that the system is being ignored in the market.
On the 20th, Song Eon-seok, a member of the National Assembly Land, Infrastructure and Transport Committee from the People Power Party, received data titled 'Real Estate Transaction Electronic Contract System Usage Status' from the Korea Appraisal Board. According to the data, there were 3,617,116 total real estate transactions last year, including sales and jeonse/monthly rent leases. Among these, only 66,148 cases, or about 1.8%, were concluded using the electronic contract system.
The real estate electronic contract system is a platform that allows contracts for real estate sales and lease agreements to be signed online using a PC, tablet, or mobile device. The Ministry of Land, Infrastructure and Transport and the Korea Appraisal Board developed the system from 2014 to 2018 with a total investment of 16.3 billion KRW to ensure transaction transparency and convenience. According to Representative Song, from 2017 to last year, the budget allocated for system maintenance and outsourced operations ranged from 330 million to 970 million KRW annually, and the related budget included in this year's main budget and the third supplementary budget amounts to 1.64 billion KRW. The total investment reaches approximately 18 billion KRW.
In particular, excluding cases where public institutions such as the Korea Land and Housing Corporation (LH) use the system for rental housing contracts, private sector usage amounted to only 6,953 cases (0.2%).
The electronic contract system has the advantage of reducing various transaction costs in real estate deals since it only requires a digital certificate and eliminates the need for paper contracts or seals. Additionally, administrative procedures are simplified as the system automatically assigns a fixed date and streamlines registration applications. It also enhances secure transactions by blocking unregistered or unqualified transactions. Economic benefits include a 0.1% additional interest rate reduction when using Didimdol and Beotimok loans.
However, due to the entrenched practice of paper contracts and vague concerns about tax exposure, the market is largely ignoring the system. Especially, sellers tend to prefer written contracts because they worry that electronic contracts might lead to tax investigations, according to frontline real estate agents. Moreover, benefits such as automatic fixed date reporting and preferential loan interest rates granted by the government are mostly given only to buyers, with little advantage for sellers or real estate agents, which is also pointed out as a problem.
Representative Song Eon-seok stated, "Without any significant benefits from using the system, real estate agents and sellers are avoiding electronic transactions," and added, "In the untact era triggered by the COVID-19 pandemic, it is necessary to prepare practical measures to increase the usage rate of the real estate transaction electronic contract system to enhance public safety and convenience."
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