Obligation of Actual Residence and Re-imposition of Comprehensive Real Estate Holding Tax... Real Estate Measures Stalled in the National Assembly

Abolition of Actual Residence Obligation to Be Re-discussed at Land Committee Subcommittee on the 10th
Re-chocwan Deferred to the 11th... Opposition Calls It 'Tax Cut for the Rich'

The government's real estate regulation easing policies, such as the abolition of the mandatory residence requirement for housing under the price ceiling system and the amendment of the law on the recovery of excess profits from reconstruction, are being delayed in the National Assembly and are not being implemented on time. The regulatory easing measures introduced by the government to ensure a smooth market transition have been drifting in the National Assembly for months. The postponement of the implementation timing is causing confusion in the market and there are concerns that the effectiveness of government policies may be diminished.

An apartment complex along the Han River in Seoul.

According to the National Assembly Land, Infrastructure and Transport Committee, the committee held a bill review subcommittee meeting on the 26th of last month and submitted a bill to amend the Housing Act to abolish the mandatory residence requirement, but the review was postponed due to many disagreements. The amendment to the law on the recovery of excess profits from reconstruction is also scheduled to be discussed again this month.

The Housing Act amendment, scheduled to be discussed again on the 10th, mainly aims to abolish the 2 to 5 years mandatory residence requirement for houses in areas subject to the price ceiling system. Earlier, as the housing market slump continued, the government amended the enforcement decree of the Housing Act to ease the resale restriction period of pre-sale rights, which was up to 10 years in the metropolitan area, to 3 years for public land, regulated areas, and areas subject to the price ceiling system, 1 year for densely controlled areas, and 6 months for other areas, effective from the 7th of this month. However, for complexes subject to the price ceiling system, the mandatory residence period of 2 to 5 years is seen as a stumbling block, preventing the policy from showing its full effect.

The law on the recovery of excess profits from reconstruction is considered the final hurdle for reconstruction complexes. Although the reconstruction project speed has accelerated due to the easing of safety inspection regulations, the core regulation?the amendment to the law on the recovery of excess profits from reconstruction?has not passed the National Assembly, so project feasibility has not been secured. This law requires that if housing prices rise due to reconstruction, up to 50% of the profit?calculated by subtracting construction costs, development expenses, and average housing price increases from the capital gains?must be paid as a charge. Depending on the reconstruction complex, households may have to bear several hundred million won, which has been cited as a factor reducing project feasibility.

The Ministry of Land, Infrastructure and Transport announced a ‘rationalization plan for reconstruction charges’ last September, easing the charge threshold from excess profits of 30 million won to 100 million won, and has been pushing for legal amendments. The amendment to the law on the recovery of excess profits from reconstruction is scheduled to be discussed on the 11th of this month. However, opposition parties criticize the government and ruling party’s proposal as excessive tax cuts, and a difficult path to bipartisan agreement is expected.