The Banpo Hyundai reconstruction project in Seoul's Seocho District has been notified of a reconstruction excess profit recovery fee (재초환) amounting to 17.9 billion won, reigniting debates over the system's abolition and reform. Concerns are growing that increased financial burdens on reconstruction members could lead to delays in maintenance projects and a decrease in housing supply.
On November 9, the Seocho District informed the Banpo Hyundai reconstruction association of the planned fee of 17.9 billion won.
Banpo Hyundai has been redeveloped into the 'Banpo Centerville Asterium,' marking the first instance of the excess profit recovery fee being imposed in the Gangnam area.
This notification is part of the administrative process preceding the final fee assessment. Seocho District will accept objections from the association for the next 50 days before determining whether to impose the fee and the final amount. The fee may be adjusted based on the review.
The notification from Seocho District is a measure taken in consideration of the legal deadline for imposing fees. Under the Reconstruction Profit Recovery Act, the fee must be imposed within five years, meaning it must be assessed by December 30 of this year for Banpo Hyundai, which was completed in 2021.
In contrast, the Ministry of Land, Infrastructure and Transport has reportedly interpreted that, under special provisions from a 2024 law amendment, fees could be imposed until 2029. There are discrepancies in interpretations regarding the actual deadline among relevant agencies.
The excess profit recovery system is designed to recoup a portion of the excess profits generated from reconstruction projects. It was introduced to prevent the privatization of development profits and curb speculative demand, but has faced criticism over issues such as double taxation with capital gains tax and the imposition of fees on unrealized profits.
Particularly, with rising construction costs and tightened financial regulations, there are concerns that the additional burden of the excess profit recovery fee could hinder the progress of reconstruction projects.
For instance, residents of the Eunma Apartment in Daechi-dong, Gangnam, are reportedly facing additional contributions ranging from 230 million to 480 million won to move into new apartments of similar size. When factoring in the recently notified excess profit recovery fee of approximately 460 million won per person, the financial burden on members could increase significantly.
According to the Ministry of Land, Infrastructure and Transport, as of the end of 2024, 58 complexes nationwide are expected to be subject to excess profit recovery fees. Seoul has the highest number with 29 complexes, followed by Gyeonggi Province with 11 and Daegu with 10.
The average expected fee nationwide is about 103 million won per person, while in Seoul, it is estimated at around 147 million won.
Reconstruction associations are continuing to voice their opposition. On November 5, Seocho District submitted a petition and resident signatures to the Ministry of Land, Infrastructure and Transport urging the abolition of the excess profit recovery system. The request for reform was also conveyed by the National Reconstruction Maintenance Business Association, which comprises 82 reconstruction associations nationwide.
A Ministry official stated, "We will actively review opinions raised during discussions in the National Assembly regarding the abolition and reform of the excess profit recovery system. We are currently examining the contents of Seocho District's petition and the deadline for imposing fees, and we will inform Seocho District of our position as soon as it is finalized."
Meanwhile, as the actual imposition of fees becomes imminent, a bill to abolish the excess profit recovery system is pending in the National Assembly.
* This article has been translated by AI.
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