Proptech Industry "Concerns Over Young Startups Facing Entry Difficulties"
Association "Aiming to Weed Out Illegal Brokerage Such as Empty Jeonse Scams"
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[Asia Economy Reporter Noh Kyung-jo] Recently, when a bill was proposed to designate the Korea Association of Realtors (hereinafter the Association) as a statutory organization, proptech (information technology-based real estate services) companies protested, saying it could hinder innovation. In a situation where conflicting interests surround the real estate brokerage industry, the bill, which is biased toward the interests of existing realtors, is seen not only as regressive but also as potentially causing a 'second Tada' incident. In response, the Association argued that the bill is an "excessive concern," stating that it aims to protect consumers by weeding out unregistered brokers.
◆Proptech Industry Fears a 'Second Tada' Incident
A representative of the Korea Proptech Forum (hereinafter the Forum) said on the 7th, "Designating the Association, which is an interest group with only about 100,000 members out of 500,000 licensed realtors, as a statutory organization is not compatible with free competition," emphasizing, "Young people are just beginning to enter the market in the form of platform startups, and this measure blocks that progress."
On the 4th, Kim Byung-wook, a member of the Democratic Party of Korea, introduced the 'Partial Amendment to the Licensed Real Estate Agents Act,' which defines the Association as a statutory organization and mandates that licensed real estate agents seeking to register must join the Association.
The Association immediately issued a press release stating, "We will spare no effort to support the passage of the amendment bill in the National Assembly plenary session." It expressed pleasure at regaining the authority to inspect false or exaggerated real estate listings and to supervise and manage unregistered real estate brokers, which had been delegated to local governments for about 25 years.
The Association said, "The crackdown on disruptive activities in the real estate brokerage market was originally a task performed by the Association since its establishment, but in 1998, when the Real Estate Brokerage Act was amended, the authority was transferred to local governments. Since then, due to issues such as manpower and budget, enforcement has often been in blind spots. The Association will take the lead again in legalizing illegal and unregistered brokerage activities."
On the other hand, proptech companies represented by Zigbang and Dabang expressed concerns about restrictions on their activities. Even now, amid perceptions of 'territorial disputes,' they are showing movements toward innovation for consumer convenience, but mandatory membership in the Association ultimately means a return to vested interests, according to the proptech industry's stance.
A Forum representative pointed out, "Proptech platforms vary in form, including direct real estate transaction models, direct employment or connection of licensed realtors, and valuation services," questioning, "Whether the Association can encompass all of these is doubtful."
They also said that if the public interest purpose is unclear and there are parties with conflicting interests, more caution should be exercised in unifying the Association. Currently, there are four organizations with mandatory membership rules: the Bar Association, Patent Attorneys Association, Appraisers Association, and Architects Association.
Among them, the Bar Association decided in May this year to initiate disciplinary action against 53 lawyers who joined the legal service platform LawTalk. Earlier, in June last year, LawTalk reported the Bar Association to the Fair Trade Commission for violations of the Fair Trade Act and the Act on Labeling and Advertising. The Fair Trade Commission is scheduled to decide next week on whether and to what extent to sanction the Bar Association. Mandatory membership in the Architects Association was reinstated in August after 22 years, but this has also been subject to ongoing constitutional controversy.
◆Mandatory Membership in the Association May Be Unconstitutional, but "Aimed at Preventing Illegal Activities"
The Real Estate Service Council for Win-Win Cooperation in the Real Estate Service Industry held its first meeting since its launch in May and is taking a commemorative photo. [Photo by Ministry of Land, Infrastructure and Transport]
The Forum plans to create an opinion paper after discussions with policy advisory committee members and deliver it to the National Assembly and government. It is expected to include concerns about the potential unconstitutionality of mandatory membership in the Association. The Forum said that although they had met with Representative Kim earlier, they could not prevent the introduction of the prepared amendment bill.
In this regard, Professor Hwang Chang-geun of Hongik University’s Department of Law said, "Designating the Association as a statutory organization and mandating membership may infringe on the constitutional fundamental rights guaranteeing individuals the freedom to establish and participate in associations, so it is implemented restrictively. Considering that multiple organizations related to real estate brokerage exist and that more than 300,000 licensed realtors do not participate in the Association, this bill contains many unconstitutional elements."
He also expressed the opinion that practical systems are needed to foster the growth of proptech. As the number of proptech companies increased, the government enacted the 'Real Estate Service Industry Promotion Act' in 2018. Subsequently, it established the 'Basic Plan for Promoting the Real Estate Service Industry (2021?2025)' in 2020 and announced the 'Real Estate New Industry Promotion Plan' in November last year.
The Forum lamented that these measures are more symbolic, aiming to advance the real estate industry as a whole rather than focusing specifically on proptech. Meanwhile, they expressed hope that the proptech industry might gain momentum as Land, Infrastructure and Transport Minister Won Hee-ryong recently declared his intention to "break vested interests" as part of mobility innovation.
Meanwhile, an Association official said, "We understand that the proptech industry is worried about possible disadvantages or being pressured if the amendment bill passes the National Assembly," explaining, "We cannot forcibly block services that consumers seek. Rather, we aim to contribute to eliminating scams such as 'empty lease fraud,' unregistered brokers, and illegal companies disguised as consulting firms."
He added, "Although we are not a judicial body and cannot conduct comprehensive crackdowns, if the Association is granted investigative authority, it will also align with the role of licensed realtors in protecting property rights."
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