Crane Stopped at Dunchon Jugong Reconstruction... "If Halted for Over 10 Days, Contractor Termination"

‘Construction Halted’ at Dunchon Jugong Reconstruction Site
Residents Excited for Next Year’s Move-in Face ‘Shock’
Association to Approve Contract Termination if Construction Stops Over 10 Days
If Prolonged, Year-End Sale Uncertain

On the afternoon of the 13th, workers are seen packing various facilities and equipment as they leave the reconstruction construction site of Dunchon Jugong Apartment in Gangdong-gu, Seoul. The construction company announced that due to intensified conflicts with the association, construction will be halted starting at midnight on the 15th. (Photo by Ryu Taemin)

[Asia Economy Reporters Tae-min Ryu, Seo-yul Hwang] "Just a month ago, I was excited thinking we would move in by next August, but suddenly the construction has stopped, and I am very shocked. I hope the conflict is resolved smoothly." (A member of the Dunchon Jugong Reconstruction Association, Gangdong-gu, Seoul)

"We cannot just wait indefinitely for the construction company to be decided and let the members suffer damages." (A representative of the Dunchon Jugong Reconstruction Association)

The tower crane, which had been busily moving between buildings, stood still like a frozen screen. The construction site, which should have been filled with loud machinery noises, was silent. Steel bars and construction materials scattered around were neatly organized. This was the scene at the Dunchon Jugong apartment reconstruction construction site in Dunchon-dong, Gangdong-gu, Seoul, visited by the reporter on the afternoon of the 13th, two days before the construction halt.

On that day, construction workers were packing up machines and equipment and leaving the site. The construction halt was scheduled to begin at midnight on the 15th. Despite the worried gazes of the association members, some sites had already finished work early and sealed off the entrances.

The Dunchon Jugong apartment reconstruction project, where the construction company and the association are in conflict over construction costs, currently has a progress rate of 52%. The apartments are halfway built, but an unprecedented situation has occurred where construction is indefinitely halted starting at midnight on the 15th. The construction companies, including Hyundai Engineering & Construction, decided to stop construction, and the association responded with the strong measure of 'contract termination.' Amid this standoff, serious disruptions are feared for the plan to supply about 12,000 housing units.

Association Draws Sword, Delegates' Meeting Conditionally Approves 'Contract Termination' with Construction Company

The Dunchon Jugong Reconstruction Association held an emergency delegates' meeting on the afternoon of the 13th and conditionally approved the contract termination with the construction company. The condition is if the construction halt continues for more than 10 days. Unless there are unexpected variables, the association is expected to propose the contract termination agenda as planned on the 25th, after 10 days of construction halt. The construction company stated, "This is the expected course," and "The construction halt schedule will remain unchanged."

The main reason for the difficulties in the Dunchon Jugong reconstruction project lies in disagreements over increased construction costs. Originally, the construction cost was contracted at 2.6 trillion won in 2016, but due to changes such as an increase in the number of households and additional commercial buildings in 2020, the contract was increased to 3.2 trillion won. However, voices opposing this contract emerged, leading to a change in the executive committee. The new committee claimed the contract was invalid due to lack of proper procedures and even filed a lawsuit. As the conflict escalated, the Seoul Metropolitan Government attempted mediation, but the differences remained unresolved, ultimately leading to the construction halt.

The association plans to hold a general meeting on the 16th to also cancel the resolution made on December 7, 2019, regarding the construction cost increase. A representative of the association said, "More than 4,300 members, over 72% of the total 5,930 members, have submitted written consent forms," adding, "The consent rate continues to rise."

If the project drags on, damages to association members are inevitable. So far, interest on relocation loans has been paid from the project funds, but as the funds are nearly depleted, members are now bearing the interest themselves. When the relocation loan matures in July this year, the burden will increase further. This situation could also seriously disrupt Seoul's housing supply plans. According to Real Estate R114, the number of new apartment units scheduled for occupancy in Seoul this year is 20,520, the lowest since 2017. More than half of this, 12,032 units, were to be supplied by Dunchon Jugong. Since members have relocated since 2017 and are living in rented housing elsewhere, delays in moving in will worsen the rental housing shortage, causing greater repercussions.

The longer the construction is delayed, the greater the damage to the members. Until now, interest on relocation loans was paid from project funds, but as funds are nearly exhausted, members are bearing the interest themselves. When the relocation loan matures in July this year, the burden will increase. In the worst case, if the loan is stopped, members will have to repay it, and even if extended, recent consecutive interest rate hikes could result in higher interest charges. Member B said, "I have been paying interest since February," and sighed, "The longer the construction is delayed, the more the members suffer."