Panoramic view of the ‘Olympic Park Foreon’ site in Dunchon-dong, Gangdong-gu, Seoul. Photo = Yonhap News The bill to abolish actual residence has reached the stage of being repealed. The government declared its abolition, but the bill failed to pass the National Assembly amid a tense standoff between the ruling party and the opposition party. Consumers who subscribed or signed a contract believing the government’s promise to ‘remove the actual residence obligation’ are holding out hope.
According to the political circles and real estate industry on the 7th, the Land, Infrastructure and Transport Committee’s Bill Review Subcommittee (Bill Subcommittee) before the plenary session of the National Assembly on the 9th is likely to discuss an amendment to the Housing Act that includes the abolition of actual residence. The problem is that it is unlikely to pass the National Assembly threshold. This time, if the ruling and opposition parties do not agree on the bill, it is expected to be scrapped.
The actual residence obligation literally means that you have an obligation to live in the apartment you have purchased. It is a system that restricts resale and is bundled into a package. The relaxation of resale restrictions has already been applied to the market after the government revised the enforcement ordinance. The actual residence obligation is an issue that requires revision of the Housing Act.
The bill to abolish the actual residence requirement is drifting due to the conflict between the ruling and opposition parties.
The Land, Infrastructure and Transport Committee of the National Assembly held a Land, Infrastructure and Transport subcommittee to discuss easing the standards for recovering excess profits from reconstruction (Refund Act) and abolishing the actual residence requirement (Housing Act). Photo = Hankyung DB Even if the resale restriction period is relaxed, if the actual residence obligation is maintained, it will be less effective. Some tenants who have difficulty securing financing receive a deposit for rent and pay the balance when they move in. If the actual residence obligation is not abolished, the landlord will have to move in and live there. This means that you can’t let go of the jeonse. As a result, the balance schedule may be disrupted.
An ironic situation also arises where the buyer sells the apartment before moving in after the resale restriction period has expired, but must fulfill the mandatory period of actual residence. If the adoptee does not complete the residence period, it is a violation of the current law. Violation of this is subject to imprisonment of up to one year or a fine of up to 10 million won. In the worst case scenario, the house must be resold to the Korea Land and Housing Corporation (LH) at the sale price.
The bill to abolish the actual residence requirement, which had been floating around the National Assembly since February of last year, began to receive attention in December of the same year. At the Legislation Subcommittee held on the 6th, the housing law amendment was not even on the subject of discussion, and discussion of the amendment was put on hold again on the 21st. It was decided to hold another bill subcommittee meeting on the 27th to discuss it, but this also fell through.
The reason why the bill to abolish the actual residence requirement cannot be easily passed is because of the tense standoff between the ruling and opposition parties. The opposition party is concerned that ‘gap investment’ will become rampant. If the actual residence obligation is abolished, it is possible to subscribe to a complex where the sale price cap system is applied for the purpose of market profit and pay the balance through jeonse when moving in. Another reason is that if the system is abolished by passing the bill, it may violate fairness, as there are prospective applicants who did not apply due to the obligation to live in the system.
The ruling party proposed an amendment to the Housing Act that would maintain the system if it is difficult to abolish the actual residence obligation, but only require that the actual residence obligation be fulfilled until the house is sold. However, the opposition party is also opposing alternative measures. Kim In-man, director of the Kim In-man Real Estate Economic Research Institute, explained, “The best way to reduce confusion would be to pass the bill, but if passage is difficult, there is a need to open an exit strategy through a relaxation plan.” The number of adoptees related to the bill to abolish the actual residence requirement is estimated at 40,000 households. According to the Ministry of Land, Infrastructure and Transport, there are 43,786 apartments in 66 complexes across the country that have applied for approval to recruit residents since February 2011 and are subject to the actual residence requirement. Contractors who had expected the actual residence obligation to be lifted said, “I am frustrated because there is no solution.”
Representative A of a certified real estate agent in Dunchon-dong, Gangdong-gu, Seoul, explained, “You can buy and sell pre-sale rights, but since there is an obligation to live in the property, resale is virtually impossible,” adding, “The burden on prospective buyers who had planned to pay the balance by receiving a deposit for rent has increased significantly.” did.
There are also voices in the construction industry calling for the abolition of the actual residence requirement. Jeong Won-joo, chairman of the Korea Housing Construction Association (Chairman of Daewoo Engineering & Construction), emphasized that “urgent action is desperately needed” regarding the housing law amendment abolishing the actual residence requirement.
At worst, both the down payment and the down payment are lost.
The market assumes that the worst case scenario is that the buyer is unable to pay the balance and the contract is terminated. In this case, it can affect not only the tenant but also the implementation or construction companies. From the buyer’s perspective, both the down payment and the intermediate payment will be lost. From the business owners’ perspective, problems may arise if funds flow is not smooth.
An official from a construction company said, “Isn’t it impossible to wait until the bill is passed while charging late interest?” and “It’s unfortunate for the tenants, but there is currently no way out.”
However, there is still a glimmer of hope left. This is because the government has announced a policy to ensure that it can be passed at least in the extraordinary session of the National Assembly. Kim Oh-jin, the first dimension of the Ministry of Land, Infrastructure and Transport, responded to reporters’ questions about the bill to abolish actual residence at the ‘LH Innovation and Construction Cartel Abolition Plan’ briefing held at the Government Complex in Seoul in December last year, saying, “Even if it is late, we will consult with the opposition party once again when the extraordinary National Assembly is convened. “We will do our best to ensure that the bill to abolish the actual residence requirement is passed by the National Assembly,” he emphasized.
Some believe that a dramatic agreement may be reached as there is still time until this year’s general elections. An industry official said, “I don’t know if it’s after the general election, but I think there’s still a possibility until the general election. For now, we’ll just have to keep an eye on the situation.”
Lee Song-ryeol, Hankyung.com reporter [email protected]
2024-01-06 22:00:12
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