As the private apartment construction business is sluggish and competition is heating up to win urban redevelopment projects, large contractors, such as Samsung C&T, Hyundai E&C, Daewoo E&C and DL E&C are turning their attention to land public project orders.
Construction industry sources said on Dec. 11 the private sector’s participatory public projects being implemented by Korea Land & Housing Corp. (LH) and public urban city redevelopment projects have emerged as new revenue sources for major contractors.
Medium-sized construction companies have focused so far on the public construction market, but large contractors’ entry in the market has increased due to guaranteed stable revenues.
Hyundai E&C, Daewoo E&C, DL E&C and GS E&C have been so far selected as preferred negotiators of the private sector’s participatory public housing projects, publicly notified by LH.
The public housing projects have adopted a system in which payments have been made according to the progress of construction, and even if the related housing units fail to find buyers, LH is to take responsibility for the situation.
Business sources analyzed that one of the core factors attracting large-sized contractors is the fact that the private sector’s participatory redevelopment projects, being implemented by LH, has a stable structure with similar profitability of the private sector’s housing redevelopment projects.
GS E&C has landed one such project in Gwangmeyong Siheung, a third satellite city, and steel modular public housing project in Siheung Geomo in succession.
Since modular housing, a new business, causes a greater unit price burden for the private sector, contractors plan to expand their participation in public housing projects being implemented by LH.
The portion of large-sized contractors in the public urban multi-purpose projects in Seoul is on the rise. Half or three of the six projects selected by LH have gone to large-sized contractors.
Public urban multi-purpose projects target decrepit districts or areas near mass transit, where the private sector has a hard time implementing redevelopment projects.
LH’s participation in the projects brings about regulatory relaxation benefits, such as simplified licenses and permits. Such projects are evaluated to become the government’s representative housing model that allows project feasibility and rising housing supply.
A consortium of DL E&C and Samsung C&T was awarded with the “Jeungsan 4th District Urban Public Multi-purpose Project” on Nov. 29.
The project costs some 1,943.5 billion won, the largest of its kind. DL E&C has a 53 percent stake, while the remainder is owned by Samsung C&T.
LH is aggressively spurring large-sized contractors’ participation by conducting core institutional reform, such as an increased floor area ratio.
Of late, LH has built an integrated management system designed to manage urban public multi-purpose projects, public redevelopment and reconstruction projects. To do so, it by inaugurated the Seoul Metropolitan Area Refurbishment Business Special Headquarters, which is in charge of supplying housing in the Seoul metropolitan area.
President Song Seung-heon of City and Economy said, “LH’s launch of aggressively luring large-sized contractors may be construed as its strategy to raise quality, speed and the financial stability of public housing projects. Large-sized contractors’ greater participation not only reinforces the design and construction capability in the whole process, but also speeds up the projects.”
He said these have an effect of expanding the foundation for supplying public housing and reducing supply time gaps.
LH Begins Occupant Recruitment Notice on Namyangju Wangsuk District A-24, B-17 Block
The Ministry of Land, Infrastructure and Transport and LH launched an occupant recruitment notice on the new satellite city Namyangju Wangsuk District A-24, B-17 Block on Nov. 27.
The Namyangju Wangsuk District is an area attracting greater demand from real buyers in the Seoul metropolitan area thanks to excellent access to Seoul with metropolitan transportation means, such as GTX-B.
Construction of some 8,000 units in 11 blocks are under way, and a ground-breaking ceremony for building some 10,000 units is to take place next year.
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