Installment Payment of House Prices Over 20-30 Years 'Equity Accumulation Housing', 10-Year Resale Restriction and 5-Year Residency Obligation

Ministry of Land, Infrastructure and Transport Announces Legislative Notice for Amendment to Enforcement Decree of Special Act on Public Housing

Example of Equity Accumulation Housing Operation.

[Asia Economy Reporter Kangwook Cho] Detailed information on equity accumulation-type housing, which is sold at one-quarter of the sale price in public sale complexes, has been released. Buyers can acquire 10-25% of the equity every time over 20 or 30 years, and before that, they must pay rent on the remaining equity at about 80% of the surrounding market price. The resale restriction period is set at 10 years, and the mandatory residence period is set at 5 years.

The Ministry of Land, Infrastructure and Transport announced on the 10th that it will jointly announce with the Seoul Metropolitan Government a legislative notice for the amendment of the Enforcement Decree of the “Special Act on Public Housing” to specify the details of equity accumulation-type sale housing.

Equity accumulation-type housing is a housing method where buyers move in by paying only 10-25% of the sale price and acquire the remaining equity over 20 or 30 years. Before acquiring 100% equity, buyers must pay rent on the equity held by the public housing project operator.

According to the amendment, public housing project operators such as Korea Land and Housing Corporation (LH) will determine the equity accumulation period between 20 or 30 years considering the housing supply price, etc. High-priced housing is expected to have a 30-year period, while mid-to-low priced housing will have 20 years.

Buyers can choose between 20 or 30 years depending on their financial situation. Equity accumulation can be acquired within the range of 10-25% each time. The equity acquisition price is calculated based on the initial sale price plus the one-year fixed deposit interest until the equity is acquired. For example, after paying 25% of the initial sale price and moving in, the buyer pays ‘15% + one-year fixed deposit interest’ over five times in 20 years.

During the equity accumulation period, buyers must pay rent to the public housing project operator for the remaining equity. The rent is set at about 80% of the rent of nearby houses.

The resale restriction period for equity accumulation-type housing is set at 10 years, and the mandatory residence period is set at 5 years. After the 10-year resale restriction period, buyers can sell the house. However, they must obtain the consent of the public housing project operator and negotiate the sale price. If it is unavoidable to dispose of the house within the resale restriction period, the house must be repurchased by the public housing project operator at the acquisition price plus fixed deposit interest.

The amendment to the Special Act on Public Housing, which introduces equity accumulation-type sale housing, is scheduled to take effect on August 19. The government and Seoul City plan to announce supply plans related to equity accumulation-type sale housing in the second half of this year.

Kim Hongmok, Director of Housing Welfare Policy at the Ministry of Land, Infrastructure and Transport, said, "Through this amendment, we expect that the new public sale system called equity accumulation-type sale housing will enable people to own homes according to various situations."

Kim Seongbo, Head of Housing and Architecture at Seoul City, said, "Equity accumulation-type sale housing, as affordable housing, will greatly help stabilize the housing market in the long term and support residents’ housing stability and asset formation. We will cooperate with the government to ensure prompt supply through pre-sale, etc."

If you have any opinions on the amendment, you can submit them by mail, fax, or online by July 13.