Anyang Naengcheon District 'Proportional Rate' Expected at 122%... Resident Contributions Likely to Decrease Significantly

Gyeonggi Housing and Urban Development Corporation

The 'proportional rate' in the Naengcheon District of Anyang City, Gyeonggi Province, is expected to be determined at a considerably high level of around 122%.

The proportional rate is an indicator calculated by dividing the amount obtained by deducting the total project cost from the total revenue after project completion by the previous asset appraisal value, with 100% as the standard for assessing project feasibility. An increase in the proportional rate leads to a reduction in the contribution amount of landowners and others or an increase in refund amounts.

Gyeonggi Housing and Urban Corporation (GH) announced on the 7th that despite the nationwide increase in construction costs and interest rates, which has increased the burden of contributions, the proportional rate for the residential environment improvement project in Anyang Naengcheon District, implemented by GH, is expected to be unusually high at around 122%.

This is because, at the recent general meeting of landowners and others in the Anyang Naengcheon District, the agenda items of the 'Management Disposition Plan Amendment' and the 'Handling Plan for Relocation Loan Interest and Interest Dividend, including Loan Processing' were passed, laying the foundation for realizing a proportional rate of 121.83%. GH plans to proceed with the approval process for the amended management disposition plan with a proportional rate of 121.83%.

Compared to other similar union maintenance projects in Anyang conducted around the same time, where Apartment A targeted a proportional rate of 100% and Apartment B 109%, but both were reduced to 94%, the figure for Anyang Naengcheon District is considerably high.

Anyang Naengcheon District was selected by the Ministry of Land, Infrastructure and Transport in 2004 as a residential environment improvement project and designated as a maintenance zone in 2009, but the Korea Land and Housing Corporation (LH) abandoned the project in 2013. In 2016, the project implementer was changed from LH to GH, and the implementation method was changed to a management disposition method, finalizing plans to build 2,329 households across four blocks on an 119,000㎡ site with three underground floors and 29 above-ground floors, with move-in scheduled for January next year.

Despite rising construction costs and interest rates, the fact that Anyang Naengcheon District shows a proportional rate in the 120% range is analyzed to be greatly influenced by GH’s 'public method maintenance project.' Residential environment maintenance projects are those where the public sector supports and takes responsibility for projects in areas where feasibility is lacking, making project promotion difficult.

Since price fluctuations other than construction delays are not reflected in construction costs, and low-interest loans are possible through direct lending by GH, project costs could be managed efficiently. In contrast, the union method inevitably increases project cost burdens as price increases lead to higher construction costs and market interest rates rise.

Despite the successful project promotion in Anyang Naengcheon District, some landowners and others are demanding "disclosure of apartment quality improvement costs and detailed breakdowns" regarding the use of development profit funds amounting to around 180 billion KRW.

A GH official stated, "We invested 109.9 billion KRW reflecting the residents' representatives' requests for construction upgrades, and the remainder was spent as price fluctuation costs according to contracts or related laws." However, some landowners argue, "Development profits should be used to reduce residents' contribution amounts."

Regarding the detailed breakdown of construction costs, GH stated, "DL E&C, the joint project implementer, refuses to submit documents citing the Information Disclosure Act and concerns about data leakage, but we will persuade DL E&C to provide materials to the residents' representative meeting."

The official added, "We will do our best to resolve complaints raised by residents of Anyang Naengcheon District through forums and other means."