Large and mid-sized construction firms are moving one after another into redevelopment and urban mixed-use housing projects led by Korea Land & Housing Corporation (LH), reshaping how the industry views public redevelopment. Public housing built for sale was long seen as inferior in construction quality to privately built apartments because of caps on sale prices and construction costs. Those limits have been eased for public redevelopment projects, and a range of incentives now allows developers to pursue higher-end designs. Residents also expect the value of their homes to rise as major builders apply their own apartment brands.
Hanwha's construction division is seeking to win the 1-2 district of a small-scale street housing redevelopment project in Seokgwan-dong, Seongbuk-gu, Seoul, after securing the 1-1 and 1-7 districts, according to industry officials on the 5th. The association for the 1-2 district held a second on-site briefing last month, which Hanwha's construction division attended alone. It was also the only participant at the first briefing, and is expected to secure the contract through a negotiated agreement.
"If Hanwha's construction division also wins the 1-2 district, the three Seokgwan-dong street housing districts combined could form a Hanwha Forena brand town of about 1,700 homes," an official at the 1-1 district association said. "Association members view the bid by Hanwha's construction division, a major builder, favorably and expect a premium complex."
Doosan E&C was selected this year as the contractor for a street housing redevelopment project at 655-78 Sillim-dong. It also secured the contract for an LH urban public housing mixed-use project in Bucheon, Gyeonggi Province. "We proposed applying We've the Zenith, our premium residential brand," a Doosan E&C official said. "As we build experience carrying out public projects, we plan to create a landmark residential complex."
LH runs a range of programs, including urban public housing mixed-use projects, public redevelopment and small-scale schemes such as street housing redevelopment. In all of LH's public redevelopment projects, residents choose the contractor, so complexes can carry private apartment brands such as Samsung's Raemian and GS's Xi rather than LH's. Some public redevelopment complexes are being planned with penthouses and large community facilities, hallmarks of high-end housing.
Builders are moving into publicly led redevelopment because it eases concerns about permit delays and project risk. They once hesitated because project direction could shift with government policy, but stronger incentives such as eased floor-area ratio rules have changed their assessment. Public redevelopment projects receive a floor-area ratio bonus of 1.2 to 1.4 times that of private projects, and because the price cap on new homes does not apply, units can be sold on the open market at market prices. With the central government and local governments streamlining permit procedures to speed up housing supply, project timelines are estimated to be about two years shorter than in conventional redevelopment.
In private redevelopment and rebuilding projects, contractors must provide guarantees to the association, while public redevelopment carries a lighter financial burden. "A lot of public redevelopment is going on in central Seoul, so it is also a good chance to promote our brand," an official at a major construction firm said. "The funding burden is lighter than in private redevelopment, and shorter timelines improve returns, so builders will keep competing for these contracts." An LH official said public support lowers the contributions residents must pay while allowing them to own branded apartments, and lets builders secure urban project sites with less risk.
