[2026 Parliamentary Audit] 99% of Contractors' Construction Cost Increase Requests for Redevelopment and Reconstruction Projects Were "Inflated"... 4 Trillion Won Cut

Korea Real Estate Board review results over the past five years
At 10 sites, more than half of requested increases were cut
Not legally binding, leaving the findings as mere reference material

Over the past five years, 4.16 trillion won in construction costs that contractors for redevelopment and reconstruction projects had excessively demanded was cut following a review by the Korea Real Estate Board.

According to data on construction cost reviews for urban improvement projects that Assemblyman Bok Ki-wang, the Democratic Party of Korea's ranking member on the National Assembly's Land, Infrastructure and Transport Committee, received from the Board, reductions were approved at 164 (98.8%) of the 166 project sites whose construction cost reviews were completed over the past five years. This means that a substantial portion of the increases sought by contractors was not recognized as reasonable construction costs.

A reconstruction site at an apartment complex in Seocho-gu, Seoul, on July 23. Yonhap News Agency

At 10 sites, more than half of the increases sought by contractors were cut.

At a project site in Seocho-gu, Seoul, a contractor sought a 107.6 billion won increase, but the Board's review cut 66.8 billion won, or about 62%.

At a project site in Gyeonggi Province, 162.3 billion won, or about 77%, was cut from the requested increase of 210.8 billion won, leaving just 48.5 billion won recognized.

Contractors used various methods to inflate construction costs. They converted specialized items promised as free at the time of the initial bid into paid items, or included the floor area beneath built-in closets, where no flooring is installed, when calculating the area to be floored.

Another case involved charging all households in a complex for emergency escape facilities by including spaces that do not require them, such as pilotis floors with only columns and no enclosed walls or residential space, and first-floor spaces at ground level.

Construction cost reviews were introduced to reduce disputes over construction costs between housing associations and contractors. An application can be made at the request of at least 20% of association members, and an application is mandatory when the increase exceeds a certain level.

The reviewing institution calculates reasonable construction costs by comparing the increase details submitted by the contractor with standard market unit prices and price data.

The review process is faster than litigation or arbitration. The processing period is 60 days when the construction cost increase is less than 100 billion won, and 75 days when it is 100 billion won or more.

Contractors can submit supporting documents for the increase at an interim briefing and raise objections to reductions.

Even when inflated construction costs are confirmed, it is difficult for an association to compel the contractor to accept the findings. Under current law, review results are not legally binding, leaving no effective legal means to penalize contractors that dismiss them as mere reference materials or avoid applying for a review even when one is mandatory.

Assemblyman Bok Ki-wang said, "Legitimate increases in construction costs should be guaranteed, but accepting excessive increases without review could lead to an undue burden of additional contributions on association members. We must swiftly establish measures to clearly set application deadlines for projects subject to mandatory review and penalize those that avoid review without a valid reason."

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