MLIT Completes Plans for Regional Construction Market Supplementation, Confirms Promotion of Underground Railway Projects in Busan, Daejeon, and Ansan
The Ministry of Land, Infrastructure and Transport has announced large-scale policies to revitalize the regional construction market. This measure includes the promotion of underground railway projects in Busan, Daejeon, and Ansan, the purchase of unsold apartments in local areas, and the expansion of realistic construction cost measures. These actions are expected to positively impact the local economy.
Consumer Economy Inspection Meeting Held
Acting Prime Minister Choi Sang-mok held a Consumer Economy Inspection Meeting at the Government Seoul Office on February 19. Representatives from construction-related agencies and associations attended the meeting to listen to difficulties caused by sluggish construction activity and explore various ways to revive the economy.
Recently, construction investment has decreased by 2.7% compared to the previous year, negatively affecting GDP growth. In order to address this situation, the government aims to prepare proactive measures for the recovery of the regional construction market. Through these, it hopes to stimulate the construction industry and have positive effects on the overall economy.
Main Promotion Measure 1. Full Promotion of Railway Underground Projects
The government has announced that it will prioritize the promotion of underground railway projects in Busan, Daejeon, and Ansan. This project has a total scale of 4.3 trillion won, with the basic plan expected to begin in the first half of 2025.
In Busan, development will take place over approximately 370,000 square meters by creating an artificial ground on the railway site between Busanjin Station and Busan Station, with an investment of 1.4 trillion won. In the Daejeon area, development to create a youth entrepreneurship and IT growth hub will be conducted at the Daejeon Marshalling Yard, also with a budget of 1.4 trillion won. In Ansan, the undergrounding of the Ansan Line between Cheongyo Station and Central Station will occur, along with the creation of a compact city around the station area covering 710,000 square meters. This project will be carried out with an investment of 1.5 trillion won.
Furthermore, the government plans to establish additional measures through consultations with local governments regarding major railway lines in the metropolitan area, such as the Gyeongbu Line, Gyeongin Line, and Gyeongwon Line. These projects are expected to make a significant contribution to regional development and increase transportation convenience.
Main Promotion Measure 2. Purchase of Unsold Apartments and Activation of the Real Estate Market
To solve the issue of unsold apartments in regional areas, LH will directly purchase 3,000 unsold apartment units after completion. Furthermore, plans are underway to expand the registration lease system for private rental businesses utilizing unsold housing in these regions, along with amendments to the Private Rental Housing Act.
In addition, preferential interest rates for stepping stone loans for consumers purchasing unsold housing in regional areas and broader financial support for activating housing transactions are also planned. These actions are expected to positively impact the activation of the local real estate market.
However, there are criticisms that this measure has limits in fundamentally solving the unsold problem. With the high uncertainty in the real estate market, it is evaluated that without additional incentives such as tax support, it is difficult to sufficiently attract private purchasing demand.
To effectively resolve unsold units, tax benefits are essential, and measures such as easing regulations on multiple homeowners, acquisition tax reductions upon purchasing unsold properties, and exemption from capital gains tax are needed. Only with these measures can actual demand increase its interest more actively.
As mentioned in the previous post regarding unsold apartment measures, this policy does not present a fundamental solution and therefore may not significantly help in resolving the issue. Additional policy supplements are likely to be needed in the future.
Main Promotion Measure 3. Realistic Construction Cost Measures and Induction of Investment in the Construction Industry
To reduce the burden of construction costs, the ministry will actively apply realistic construction cost measures even to projects ordered by local governments and public agencies. Measures such as increasing bid rates and improving price reflection standards, which were previously applied only to nationally ordered projects, will be expanded to local government projects to alleviate the burden on local construction companies.
Additionally, the government plans to support up to 5 trillion won in liquidity for construction companies through mechanisms such as a bond market stabilization fund, corporate bonds, CP acquisition, and policy financing support. It is also working on various measures to improve the construction business environment, including improving the responsibility completion system, reducing development fees, activating maintenance projects, and expanding PF funding support. These measures are expected to enhance the stability of the construction industry and contribute to the revitalization of the local economy.
Conclusion
The measures announced by the Ministry of Land, Infrastructure and Transport aim at activating the regional construction market and restoring the domestic economy through several key initiatives. Notably, these include railway underground projects, the purchase of unsold apartments, and realistic construction costs.
In particular, policies that reduce the burden on local construction firms and induce investment in construction are emphasized. These policies are expected to yield practical effects in the future.
The government is determined to swiftly implement these measures and will continue to provide support for the recovery of the construction industry and revitalization of the regional economy.
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