[Real Estate AtoZ] What’s the Difference Between ‘Half-Price Apartments’ Land Lease Type vs Equity Accumulation Type?

As private apartment prices soar to unprecedented levels, attention is turning to so-called ‘half-price apartments’ such as public land leasehold and equity accumulation-type sale housing supplied by the public sector. Experts advise weighing the pros and cons of each housing type from the perspectives of housing stability and asset accumulation before applying for subscription.

Location map of Magok Complex 10-2. [Image provided by SH Corporation]

Land leasehold housing is a representative ‘half-price apartment’ supplied by Seoul Housing and Communities Corporation (SH). It is a type of sale housing where the public owns the land, and the buyer acquires ownership of the building. Since the land price, which accounts for more than half of the apartment sale cost, is excluded, the initial sale price can be lowered to about 30-60% of the price set by the private sector, earning it the name ‘half-price apartment.’ A typical example is the ‘Magok 10-2 Complex (260 units),’ which is scheduled to open pre-subscription applications on the 16th. The estimated building sale price for a 59㎡ exclusive area is approximately 311.19 million KRW.

Another type of ‘half-price apartment’ is the equity accumulation-type sale housing supplied by Gyeonggi Housing and Communities Corporation (GH). Buyers pay only 10-25% of the sale price upfront and gradually increase their housing equity every four years over 20-30 years to eventually own their home. For example, out of 600 units to be supplied in Block A17 of Gwanggyo New Town in Suwon, Gyeonggi Province, 240 units will be offered as equity accumulation-type housing. Construction is scheduled to begin in the second half of 2025, and the initial sale price for a 59㎡ exclusive area in Gwanggyo is estimated at 125 million KRW.

Both land leasehold and equity accumulation types share the common feature of requiring rent payments. In land leasehold housing, since the land price is not included in the sale price, residents must pay public land rent. For the Magok 10-2 Complex, the estimated monthly land lease fee is 697,600 KRW. Equity accumulation-type housing also requires payment for the use of the public equity. For example, if a resident owns only 25% equity, they must pay rent for the remaining 75%. The usage fee decreases as the acquired equity increases.

The biggest difference between land leasehold and equity accumulation-type housing lies in whether the land can be owned along with the building and whether ‘private transactions’ are possible after the resale restriction period. Equity accumulation-type housing allows ownership of both the building and the land, and after a 10-year resale restriction period, owners can sell to others at market prices, enabling capital gains. However, the sale price is determined by a method set by GH rather than the ‘market price,’ and if sold before acquiring 100% equity, profits must be shared with GH proportionally to the equity.

Location map of Gwanggyo New Town A17 Block. [Image provided by GH Corporation]

On the other hand, under current law, land leasehold housing can only be repurchased by public entities such as Korea Land and Housing Corporation (LH). Residents cannot freely buy or sell the housing, and the disposal price is limited to the sale price plus inflation and fixed deposit interest rates, making it difficult to realize significant capital gains. However, land leasehold housing has the advantage of allowing long-term residence in an owned home at a relatively low cost. This is particularly beneficial amid recent issues with jeonse fraud and sharply rising monthly rents, contributing to housing stability. Residents can live for up to 40 years and extend the contract for a maximum of 80 years (40+40).

Yoon Soo-min, a real estate specialist at NH Nonghyup Bank, said, “From a housing perspective, cost is important, so land leasehold housing, which allows stable residence at relatively low rent, is suitable, while from an asset accumulation perspective, equity accumulation-type sale housing, which allows capital gains, is more appropriate. I recommend comparing the pros and cons of each housing type before applying for subscription.”