Don't Follow the Dunchon Jugong Subway Path... Jamsil Jinju and Daejo 1 District Seek Compromise

Jamsil Jinju Seeks Construction Cost Compromise
Association Requests Around 7 Million KRW per 3.3㎡
Samsung C&T to Review and Respond Within This Month
Coordinator Assigned to Daejo 1 District
Seoul City "Fully Committed to Finding Construction Resumption Plan"

Struggling to find compromise solutions amid conflicts between associations and construction companies and internal disputes within associations, various reconstruction and redevelopment projects are failing to make progress. To avoid following in the footsteps of Dunchon Jugong, where construction was halted for six months causing project costs to increase by 1 trillion won, various methods are being explored.

Jamsil Jinju - Samsung C&T Seeks 'Construction Cost Compromise'

According to industry sources on the 17th, Samsung C&T recently received a request from the Jamsil Jinju Reconstruction Association to adjust the construction cost to around 7 million KRW per 3.3㎡. They are considering completing internal reviews within this month and notifying the association of a compromise proposal.

The Jamsil Jinju Apartment Reconstruction project involves building 2,678 units on a site in Sincheon-dong, Songpa-gu. Samsung C&T and Hyundai Development Company are jointly responsible for construction. In 2021, the association and the construction companies agreed to raise the construction cost to 6.6 million KRW per 3.3㎡. However, conflicts arose when the construction companies requested the association to adjust the cost to 8.89 million KRW per 3.3㎡, citing increases in raw material prices and design changes. Last month, the association proposed a motion at the general meeting to request the Korea Real Estate Board to verify the construction costs, but it was rejected.

Jamsil Jinju Apartment Reconstruction Project Site

A Samsung C&T representative explained, "If an agreement is reached between the association and the construction companies, it may not be necessary to proceed to the construction cost verification stage. We plan to deliver the construction cost to the association and proceed with negotiations within this month."

The longer the conflicts persist and the reconstruction projects are delayed, the more the project costs balloon like a snowball. The Dunchon Jugong reconstruction project is a representative case. During the six months of halted construction, loan interest rates rose and raw material prices surged, resulting in a burden of over 120 million KRW per household.

'Between a Rock and a Hard Place' Daejo 1 District, Coordinator Deployed

The situation in Eunpyeong-gu’s Daejo 1 District, which is also suffering from internal association disputes, is even more severe. The project, which involves investing 580 billion KRW to build 28 buildings with 2,451 units, was halted from the beginning of the new year.

Since construction began in October 2022, Hyundai Construction, the contractor, stopped work and initiated a lien after the association failed to pay 180 billion KRW in construction costs. To make matters worse, the association’s executive body managing the affairs is currently vacant. In February last year, a provisional injunction was accepted that suspended the duties of the previous executive body and also the acting executive body of the association. Until a new executive body is formed, negotiations regarding construction costs are impossible. The sales schedule planned for the first half of last year has also become uncertain.

The redevelopment site of Daecho 1 District in Eunpyeong-gu, Seoul has been halted since January 1st. The construction company Hyundai Engineering & Construction put up a banner stating "Construction Halted." (Photo by Yonhap News)

To resolve this crisis, the Seoul Metropolitan Government dispatched four coordinators specialized in redevelopment projects to Daejo 1 District in Eunpyeong-gu starting from the 12th. Previously, coordinators were also deployed to Dunchon Jugong, which led to the resumption of construction. After six months of halted construction, the project cost increased by 35.6%, from 3.2 trillion KRW to 4.34 trillion KRW.

An official from Eunpyeong District Office explained, "The coordinators, composed of experts such as lawyers, have listened to the association’s situation and plan to meet with association members to hear their opinions. There are also parts that need to proceed depending on the outcome of lawsuits."

Han Byung-yong, Director of Housing Policy at Seoul City, said, "It is expected to take at least one to two months to resume construction, and a new executive body needs to be formed, but we are trying to find ways to quickly restart construction. We have also met with the construction companies and received their willingness to actively negotiate."