Additional Relocation Loan for Reconstruction Becomes Available... "Regulation Easing to Expand Urban Supply"

However, interest rates lower than free or commercial banks are not allowed
Addition of 'gross floor area' standard in calculating rental housing ratio
Legislative notice on easing reconstruction regulations and improving rental housing system

Photo by Asia Economy

In reconstruction projects, construction companies will be able to lend additional relocation expenses to the association at market interest rates. In redevelopment projects, the mandatory rental housing construction ratio can now be calculated not only based on the number of existing households but also on the total floor area.

On the 26th, the Ministry of Land, Infrastructure and Transport announced that it will publicly notify and seek administrative opinions from the 27th on the amendments to the "Enforcement Decree and Enforcement Rules of the Urban and Residential Environment Improvement Act," "Rental Housing and Construction Ratios by Housing Size in Improvement Projects," and "Designation Change Notice for Support Organizations and Delegated Agencies for Improvement Projects."

◆Additional Relocation Expense Loans at Market Bank Interest Rates Allowed in Redevelopment and Reconstruction

First, the amendments to subordinate laws such as the "Enforcement Decree and Enforcement Rules of the Urban and Residential Environment Improvement Act" specify the scope of prohibited proposals by construction companies regarding relocation expenses.

The amendments improve the system to allow proposals for lending additional relocation expenses (relocation loans other than those from financial institutions) at market bank loan interest rates in both redevelopment and reconstruction projects.

Until now, proposals for lending additional relocation expenses were prohibited in reconstruction projects, causing many residents to face difficulties during relocation in the project process. The Ministry of Land, Infrastructure and Transport stated, "With this amendment, allowing proposals for lending additional relocation expenses in reconstruction projects is expected to facilitate smooth project progress."

However, to prevent overheating and confusion during the bidding process, providing moving expenses, relocation expenses, or relocation promotion expenses free of charge is prohibited. Also, support must not be provided at interest rates lower than bank loan rates.

Additionally, the scope of prohibition on false or exaggerated information provided by construction companies has been specified.

There have been cases where construction companies wishing to participate in improvement projects provided false or exaggerated information to associations, causing harm to residents. This has been clearly restricted by law to ensure transparency in improvement projects. Going forward, acts such as providing false information or concealing information about project implementation, or excessively inflating expected project profits, will be restricted.

◆'Total Floor Area' Added as a Criterion for Rental Housing Ratio Calculation...Expectations for Supply of Medium-Sized Rental Housing

System improvements have also been made regarding rental housing.

First, the calculation of the redevelopment rental housing ratio (within 20% of the total number of households as announced by the city or province governor) now includes the total floor area criterion.

Previously, the mandatory construction ratio for redevelopment rental housing was regulated only based on the number of households, leading project implementers to supply mainly small-scale rental housing, and the difference in size between sale and rental housing posed limitations on social mixing.

Accordingly, the mandatory construction ratio for redevelopment rental housing has been improved to be calculated not only based on the total number of households but also on the total floor area.

The Ministry of Land, Infrastructure and Transport stated, "This system improvement reflects Seoul City's proposal, and it is expected to respond to diverse demands by supplying medium-sized rental housing."

Photo by Asia Economy

◆Easier Use of Trust Companies...Relaxation of Project Implementer Designation Requirements

Follow-up measures to the "National Housing Stability Realization Plan" announced in August will also be implemented.

The requirements for designating trust companies as project implementers have been relaxed.

In improvement projects, for a trust company, which is a professional development institution, to be designated as the implementer, it must receive trust of at least one-third of the land area within the entire improvement zone. However, if the area includes national or public land that cannot realistically be consented to, meeting this requirement was difficult.

Therefore, the requirement for designating trust companies as project implementers has been relaxed to receiving trust of at least one-third of the area excluding national or public land, making it easier to utilize trust companies to supplement expertise if residents desire.

To support the enhancement of professionalism and transparency of associations and other project implementers, the role of improvement project support organizations will also be expanded.

In addition to existing functions such as consultation support for improvement projects, support for the specialized management system, education, and operation support, they will also perform tasks such as verification support for estimated contributions of landowners, consulting support for the establishment of promotion committees, and prior feasibility verification of management disposition plans.

Furthermore, submission of a copy of the construction contract is now mandatory when applying for approval of the management disposition plan.

Previously, there was no obligation to submit documents such as construction contracts for construction costs, which constitute a large portion of the total project cost, so approval of the management disposition plan could be obtained by submitting only estimated amounts.

To strengthen construction contract management and clarify calculation bases at the management disposition approval stage, submission of a copy of the construction contract is now required when applying for approval.

Park Yong-seon, Director of the Housing Improvement Division at the Ministry of Land, Infrastructure and Transport, said, "Through this amendment, we expect to enhance the professionalism and transparency of association operations and project promotion in redevelopment and reconstruction, facilitating smooth project progress and supporting urban housing supply through redevelopment and reconstruction projects."

Meanwhile, the full text of the amendment can be found on the Ministry of Land, Infrastructure and Transport website under 'Information Plaza/Legal Information/Legislative Notice and Administrative Notice,' and opinions on the amendment can be submitted by mail, fax, or through the Ministry's website.