Low- and Mid-Rise Reconstruction Complexes in Gangnam and Along the Han River Stand to Benefit Most

Effects of Abolishing the Reconstruction Excess Profit Recovery System
Estimated Charge for Yongsan Hangang Mansion: 770 Million Won
Impact of Assessment Timing and Construction Costs on Charges

If the reconstruction excess profit recovery system is abolished or postponed, the immediate beneficiaries would be low- and mid-rise reconstruction complexes in Seoul's Gangnam area or other neighborhoods adjacent to the Han River, where housing prices are high. These are considered highly profitable projects, which means the associations involved are subject to substantial charges due to high excess profits.

Hangang Mansion in Yongsan-gu, currently undergoing reconstruction, was notified by the Korea Real Estate Board in 2022 that the expected reconstruction charge would be about 770 million won per person. The complex, originally a five-story development with 660 units, is being rebuilt into a high-rise with up to 59 stories and 1,685 units. At the time the charge was calculated, the projected price per pyeong (3.3 square meters) at project completion was set at around 100 million won, so the actual charge is expected to exceed this estimate. In some newly built apartments in Gangnam, the price per pyeong for a standard 84-square-meter unit surpasses 200 million won.

Industry experts believe that not only reconstruction complexes in Gangnam-such as Apgujeong or Jamsil-but also new apartments in highly sought-after areas like Mok-dong and Yeouido are likely to see high sale prices, resulting in significant charges for reconstruction associations. However, since construction costs have also risen sharply over the past three to four years, the actual amount imposed may vary. For example, at Seongsu Jangmi Apartment, which is nearing the end of its reconstruction project, the average charge per person was previously estimated at around 480 million won. However, as development costs increased significantly during the project, the charge reportedly dropped to around 100 million won. This complex was also a small-scale development consisting of six five-story buildings.

Yongsan-gu Hangang Mansion

The charge received by Banpo Jugong Complex 1 (Section 3) from the district office in 2020 also averaged around 400 million won per person. For a large-scale reconstruction apartment complex in Suwon, the excess profit from the reconstruction project amounted to 1.6 trillion won, resulting in a charge of 296 million won per association member. The industry has long argued that, because the charge can vary greatly depending on when it is imposed, the calculation criteria should be revised or the charge itself should be abolished.

However, in practice, the number of cases where the charge has actually been imposed and collected is not significant. A townhouse in Jungnang-gu was charged only 32 million won in 2010, and a townhouse in Songpa-gu was charged just 10 million won in 2012. In the case of the Hannam Townhouse reconstruction project in Yongsan, a charge of 1.73 billion won was imposed in 2012, and about 1.5 billion won has been paid in installments since 2020. A townhouse in Gangnam-gu was charged 716 million won in 2014, but the association filed a lawsuit to cancel the charge, and the case is currently pending in the Supreme Court. According to an analysis by the People's Solidarity for Participatory Democracy based on 2023 data from the Korea Real Estate Board, out of 48 reconstruction complexes scheduled to receive occupancy permits by 2029, 34 are expected to incur charges due to excess profits.