"200 Million Won Offer, No Forced Loans Needed"... What’s Happening at Jamwon Reconstruction Complex [Real Estate AtoZ]

Association Withdraws Rejection of 200 Million Won Support
General Assembly to Select Construction Company to Proceed on the 30th as Planned
POSCO E&C: "Legal Review Completed"
Ministry of Land Reviewing Authoritative Interpretation

With the general meeting to select the contractor for the Shinbanpo 19th and 25th Apartment reconstruction projects in Seocho-gu, Seoul just around the corner, controversy is spreading over the multi-billion-won financial support proposed by the contractor. Some members of the association have raised concerns that if the support funds are perceived as non-repayable grants, legal issues could arise. Nevertheless, the association has decided to proceed with the contractor selection meeting as planned. However, there are suggestions that procedural variables may arise depending on the results of the Ministry of Land, Infrastructure and Transport’s (MOLIT) authoritative interpretation in the future.

According to the urban renewal industry on the 28th, Mr. A, the head of the Shinbanpo 19th and 25th Apartment Reconstruction Association, sent a text message to members on the 26th regarding the 200 million won per household financial support proposed by POSCO E&C, stating, “It is misleading to members, and non-repayable support is illegal,” and announced his intention to reject the support.

Shinbanpo 19th Apartment, Jamwon-dong, Seocho-gu, Seoul. Naver Real Estate

He later withdrew this stance. Mr. A said, “Although there were many complaints from association members, the text message was sent solely by the vice-chairman in the chairman’s name and does not reflect the executive committee’s intentions. The association, from a neutral position, wishes for a wise selection of the contractor.”

The core of the controversy is the 200 million won per household financial support proposed by POSCO E&C. POSCO E&C has proposed to provide a total of 89.2 billion won in financial support to all members, with 200 million won allocated per household. According to the association, POSCO E&C has also indicated that, upon the association’s request, the support funds could be provided in advance within the second half of this year, rather than waiting until the start of the relocation process.

Industry insiders point out that such conditions could potentially violate the Act on the Maintenance and Improvement of Urban Areas and Dwelling Conditions for Residents. This law prohibits contractors from offering, or promising to offer, money, entertainment, or any other property benefits during the contractor selection process. Excessive financial incentives during the bidding process could be interpreted as de facto provision of money, influencing member votes.

In contrast, POSCO E&C maintains that the 200 million won is not a grant but a form of loan, and thus does not pose legal issues. They argue that, since the association’s profits are expected to be maximized in the future through fixed post-sale, deferred construction payments, and reduced business loan interest rates, the structure simply allows the association to utilize future profits in advance. POSCO E&C stated in an official letter to the association on the 26th, “The 200 million won in financial support is a legal structure that has been reviewed by Kim & Chang law firm,” and, “Legality was recognized by the court in the precedent of Busan Daeyeon District 8, where a similar proposal, contract, and implementation were completed.”

Model of POSCO E&C The Banpo OTIER. Photo by Lee Ji-eun

MOLIT is currently reviewing whether the condition constitutes legitimate project cost financing related to construction. Previously, Seocho District Office, the local government, requested an authoritative interpretation from MOLIT regarding whether POSCO E&C’s financial terms violate the Urban Renewal Act. A MOLIT official explained, “We are currently reviewing whether there are any potential violations,” and added, “Even if it is determined to be a violation, the general meeting itself will not be canceled, but the violating contractor will be subject to penalties.”

Accordingly, the contractor selection meeting scheduled for the 30th will proceed as originally planned, but there may be changes depending on MOLIT’s future decision. It is common for lawsuits involving internal association disputes or contractors to cause delays in the progress of redevelopment projects. The industry views excessive cutthroat competition among contractors, which can lead to legal disputes, as an emerging variable in reconstruction projects.

Park Wongap, Chief Real Estate Expert at KB Kookmin Bank, commented, “The Han River Belt and Gangnam area are symbolic locations for contractors, which is why cutthroat competition to win contracts continues. Since reconstruction is a race against time, internal conflict and legal disputes arising from excessive project conditions can become factors that delay the project.”

This content was produced with the assistance of AI translation services.