[Taemin Ryu's Real Estate A to Z] The 'Half-Price Apartment' Jiju Housing... Is It Safe to Invest?

Low Price and No Need for Subscription Savings Account
But High Possibility of Land Purchase Delays
Risk of Project Delays and Failure Increases
Additional Contribution Burden May Occur

[Asia Economy Reporter Ryu Taemin] As nationwide housing prices soar to unprecedented heights, demand for regional housing cooperatives (Jijutaek) is drawing attention from consumers. Jijutaek offers the advantage of being able to secure a home at a relatively affordable price without a subscription savings account. However, since land acquisition is complicated, many projects have been stalled for years or ultimately fail, prompting warnings to exercise caution when investing.

The Jijutaek project involves forming a cooperative among non-homeowners or owners of small homes (85㎡ or less) who have lived in a designated area for more than six months. The cooperative acts as the developer, raising funds directly to purchase land, then selecting a construction company to build apartments, resulting in lower sale prices. There is no mandatory rental housing ratio. Membership in the cooperative is possible without a subscription savings account.

However, the key issue is land acquisition. Because there is a high likelihood of delays in purchasing land, the project carries significant risks. Unlike other redevelopment projects, Jijutaek requires a land acquisition rate exceeding 95% to obtain project plan approval. Consequently, landowners often inflate land prices and attempt to block the project by holding out, causing years of stagnation. As project delays increase costs, cooperative members may be required to pay additional fees. Even if members wish to withdraw midway, withdrawal is often difficult or they cannot recover the amounts already paid. Ultimately, members are forced to continue with the project reluctantly, and the initially promised “half-price apartments” become virtually impossible.

According to Seoul city data, as of February this year, out of 109 Jijutaek projects underway in Seoul, only 5 have actually begun construction. This means the success rate of Jijutaek projects is less than 5%. Among these, 76 projects (69.7%) remain stuck at the initial stage of cooperative member recruitment reporting.

(Source=Gyeongje Manlab)

Corruption in cooperative management is also frequent. In February, officials of a Jijutaek project in Jeonnong-dong, Dongdaemun-gu, Seoul, were indicted on charges including embezzlement. They are accused of fabricating cooperative member recruitment, inflating land acquisition and purchase rates, and pocketing 6 billion KRW. The problem is that since the project entity is the cooperative, it is difficult to recover invested funds even if the project fails.

Experts warn of the risks of Jijutaek projects considering these factors. Yoon Jihae, senior researcher at Real Estate 114, advised, “If you enter hastily based solely on Jijutaek’s profitability, you may incur significant investment costs due to project delays. It is important to carefully examine the land acquisition rate and the actual state of cooperative management before deciding whether to join.”