Union Requests Around 7 Million Won, Construction Team Delivers Final Proposal
Request for Construction Cost Revision and General Meeting by End of April
Banpo Jugong 1 Complex and Shinbanpo 22 Also Demand Increase
Since the end of last year, the construction cost dispute at the Jamsil Jinju Apartment union in Songpa-gu, Seoul, has escalated, prompting the construction consortium including Samsung C&T to issue a final ultimatum. Attention is focused on whether the union will accept the compromise proposal to lower the construction cost by 7.5% compared to before.
On the 21st, the construction consortium, including Samsung C&T and HDC Hyundai Development Company, delivered an official letter to the Jamsil Jinju Apartment reconstruction union requesting a contract change to 8.23 million KRW per 3.3㎡ for the construction cost. Along with this, they added a revised list of finishing materials and asked for confirmation by the 29th of this month. The consortium also requested that the union complete the general meeting for changes in management disposition, including the construction cost revision, by the end of April.
This is the consortium’s response to the union’s recent proposal to reduce the construction cost to the 7 million KRW range per 3.3㎡. The union and the consortium originally contracted the construction cost at 5.1 million KRW per 3.3㎡ in 2018, but raised it once to 6.6 million KRW in 2021. At the end of last year, the consortium demanded another increase in construction costs citing rising raw material prices and design changes. The notified construction cost was 8.89 million KRW per 3.3㎡. To resolve the construction cost dispute at Jamsil Jinju Apartment, the Seoul Metropolitan Government also met with the consortium last month to discuss related matters.
A Samsung C&T official explained, "We requested a reply after changing to finishing materials that can lower the construction cost," and added, "We asked to finalize the construction cost so that a general meeting can be held in April." A union official said, "We are discussing the consortium’s request, and the schedule for the general meeting can be reviewed only after the construction cost amount is finalized."
The Jamsil Jinju Apartment has not been able to set a sales schedule as the construction cost dispute has continued for over two months. The consortium planned to proceed with general sales in the second half of this year. The completion was scheduled for June next year, but delays are highly likely.
Beyond this complex, tug-of-war over construction cost increases continues at various reconstruction and redevelopment sites nationwide. On the 26th of last month, Hyundai Engineering & Construction sent an official letter to the Banpo Jugong 1st Complex 1, 2, and 4 districts union requesting to change the construction cost from 2.6363 trillion KRW to 4.0775 trillion KRW. The original contract was at 5.48 million KRW per 3.3㎡, but they are asking for an increase to 8.29 million KRW. They argue that the increase is inevitable due to rising labor and raw material costs, as well as additional design changes.
The Shinbanpo 22nd reconstruction union and the construction company Hyundai Engineering are also negotiating to raise the construction cost. The construction company proposed raising the cost from the 5 million KRW range per 3.3㎡ in 2017 to about 13 million KRW. Seoul Housing & Communities Corporation (SH Corporation) is conducting a pilot project to verify construction costs targeting Shinbanpo 22nd and Haengdang 7 districts due to the increasing disputes caused by such construction cost increase requests.
Conflicts over construction cost increases in maintenance projects are expected to continue for the time being. The construction industry has experienced the highest level of inflation since 2021. Construction material prices have risen by about 35.6% over the past three years. According to the Construction Industry Research Institute, the price of intermediate construction materials rose 35.6% from the end of 2020 to the end of last year. The construction cost index increased by 25.8%.
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