"Cooperative Members Complete Allocation, Exercise Option Selection Rights Within the Year"
Allocation Price Passed to General Buyers... Variables Such as Economic Recession
On the 15th, union members are making their way to attend the Dunchon Jugong Reconstruction Union's extraordinary general meeting held at the playground of Dongbuk High School in Gangdong-gu, Seoul. / Photo by Hwang Seoyul chestnut@
[Asia Economy Reporters Kyungjo Noh, Seoyul Hwang] The Dunchon Jugong Reconstruction Association has set the general sale period for January next year. This is in line with the agreement made last August with the construction consortium (Hyundai Engineering & Construction, HDC Hyundai Development Company, Daewoo Engineering & Construction, Lotte Engineering & Construction). As a result, the pricing at the end of the year is expected to be a key issue.
Park Seunghwan, the newly appointed association chairman, met with reporters after the temporary general meeting on the afternoon of the 15th and said, "General buyers dislike high prices, and association members hope for reduced burdens..." He refrained from elaborating further, stating that they will first wait for the verification results from the Korea Real Estate Board.
Dunchon Jugong was originally scheduled for move-in by August next year. However, due to various setbacks, the expected completion period has been postponed to December 2024 to January 2025. Although construction was halted for six months after midnight on April 15, considering the current progress rate is 52%, the construction period has been extended to the point where one might wonder if the complex has just started construction.
This delay is reportedly due to window installation issues. A representative from the construction consortium explained, "The association requested to change the previously designated window supplier, and during the building's erection, the windows could not be installed on time, which caused a butterfly effect. Without window installation, wind and rain enter the building, making it impossible to carry out floor and ceiling work." They added that they had repeatedly informed the association at the time that the change in supplier would extend the construction period by about nine months, but this was not accepted.
However, the sale period was agreed to be early next year. In particular, the association judged that the sale period could not be delayed further in order to repay project and construction costs and to maintain an equal relationship with the construction consortium for dialogue and necessary demands. Regarding this, the new executive team stated that preparations for the general sale review application are progressing well. They plan to submit the application to Gangdong District Office soon and hold a management disposition general meeting in December to finalize the general sale procedures.
The key issue is the pricing. Last month, the construction consortium requested the association to approve a revised contract amount of 4,367,756,810,000 KRW (excluding VAT). This puts association members in a position to bear an additional 180 million KRW per person. The association has requested verification from the Korea Real Estate Board, and the results are expected to take about 75 days to be announced.
The market analysis suggests that a price increase is inevitable and that to compensate for association members' losses, the price should be at least 40 million KRW per 3.3㎡. The association had set a target price of 35.5 million KRW per 3.3㎡ at the delegates' meeting in October 2019. However, the Housing & Urban Guarantee Corporation (HUG) proposed 29.9 million KRW per 3.3㎡ during their review. The association strongly opposed this and, after much deliberation, accepted the price ceiling system, delaying the schedule.
This year, based on an internal evaluation at the beginning of the year, the price was set at 32.2 million KRW per 3.3㎡, but recently, it is reported that they have considered up to 39 million KRW per 3.3㎡. This is because the basic construction cost, one of the review items under the price ceiling system, has increased due to rising raw material prices, and the price is not considered high compared to surrounding market prices. However, the possibility of unsold units due to the economic downturn must also be taken into account.
Chairman Park said, "The association members' sales were completed the day before. If the building and unit numbers are assigned by the end of the year at the latest, we will ensure that association members can exercise their rights such as option selection with the cooperation of the construction consortium." He added, "The previous administration caused too many conflicts with the construction consortium, but we will always maintain a good relationship with them."
Meanwhile, the Dunchon Jugong reconstruction is called the "largest reconstruction project since the founding of Korea," involving the demolition of the existing 5,930 households and the construction of 12,032 households in 85 buildings up to 35 floors above ground.
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