Hwacheon Daeyu Gains Additional 270 Billion Won Profit Due to Non-Application of Sale Price Ceiling System

Claims by People's Solidarity and Minbyun

On the afternoon of the 5th, in front of the Gyeonggi Provincial Government Office in Suwon, Gyeonggi Province, the university student organization 'Sinjeon National University Student Representatives Council' hung a signboard reading 'Annam City Hall' and performed a demonstration asserting the responsibility of Gyeonggi Governor Lee Jae-myung regarding the Hwacheon Daeyu controversy. Annam City is a fictional place appearing in the movie "Asura," serving as the setting where corrupt mayors, police, and construction forces collude.

Regarding the Daejang-dong development project in Seongnam City, the asset management company 'Hwacheon Daeyu,' which is under suspicion of preferential treatment, is analyzed to have gained an additional profit of 270 billion KRW from the benefit of not being subject to the price ceiling on pre-sale prices.

On the 7th, the People's Solidarity for Participatory Democracy and the Minbyun Civil Economy Committee held a press conference to announce the results of estimating and analyzing the development profits Hwacheon Daeyu gained by not being subject to the pre-sale price ceiling in Daejang-dong.

Hwacheon Daeyu sold apartments in four Daejang-dong zones (A1, A2, A11, A12) through a resident recruitment announcement in December 2018, achieving pre-sale revenue of 1.389 trillion KRW.

The People's Solidarity for Participatory Democracy and Minbyun Civil Economy Committee claimed, "If the pre-sale price ceiling had been applied to this complex, the pre-sale revenue would have been about 1.1191 trillion KRW," adding, "It could have prevented Hwacheon Daeyu from taking approximately 269.9 billion KRW in development profits."

The pre-sale price of housing subject to the price ceiling consists of land cost and construction cost. The land cost outside public land is set based on the appraisal value or the price purchased from a public institution, and the construction cost is calculated as 'basic construction cost + construction cost surcharge' as prescribed by the Ministry of Land, Infrastructure and Transport.

The People's Solidarity for Participatory Democracy and Minbyun Civil Economy Committee stated, "The land cost was estimated based on the price Hwacheon Daeyu purchased through private contracts for a total of 570 billion KRW (five zones in total, 150,109㎡), and the construction cost applied the basic construction cost announced by the Ministry of Land, Infrastructure and Transport in September 2018, before Hwacheon Daeyu recruited residents in December 2018."

Park Jeong-eun, Secretary General of the People's Solidarity for Participatory Democracy, said, "In the Daejang-dong development project, in addition to dividend income, a feast of development profits occurred in the pre-sale revenue part because, although the land acquisition stage was carried out by exercising compulsory acquisition rights through public-private joint development, the pre-sale price ceiling was not applied at the pre-sale stage due to the reason that it was private land."