Owners fume as Seoul apartment complex goes more than a year without construction approval

Frustration is mounting among owners at Jangwi Xi Radiant in Seongbuk-gu, Seoul, after the complex went more than a year past its move-in date without receiving final construction approval. The delayed registration has restricted residents from refinancing mortgages or selling their units, and concerns over additional financing costs are growing as further benchmark interest rate increases are expected before year's end.

Jangwi Xi Radiant, built on the redeveloped Jangwi Zone 4, began accepting residents in March last year after receiving a temporary occupancy permit ahead of full construction approval. The association initially targeted March of last year for final approval, then pushed the deadline to December of the same year, and later to June this year. All three deadlines have passed without approval, fueling fears of lawsuits from general buyers, restrictions on association members' property rights, and rising project costs.

The delay stems from unfinished work on infrastructure outside the complex, including roads, parks, and water and sewage systems. Redevelopment and reconstruction apartments may be occupied once a temporary use permit is granted, but full exercise of property rights can be restricted until final construction approval, the transfer announcement, and the initial ownership registration are all completed. Construction approval is the process of verifying that the building and infrastructure were built according to the project plan; only after the subsequent transfer announcement are the rights to the original land and structures formally vested in the new apartment units and their lots.

Even after construction approval is granted, the unregistered status can persist if the transfer announcement is delayed by cost settlements, land subdivision disputes, or litigation. Without a completed registry, standard mortgage lending and refinancing become difficult, and sales, gifts, and the establishment of collateral rights grow complicated. Even when tenants are found, restrictions on jeonse loans and guarantee products can affect lease agreements.

If market interest rates rise during the period of registration delay, residents' financing costs can climb further. Owners unable to switch to lower-rate mortgages are forced to maintain existing group loans or relatively high-rate borrowing. Even after registration is eventually completed and new loans are taken out, higher prevailing rates mean the interest burden extends not just through the delay period but through the full loan term.

The costs of the project delay fall on association members as well. The longer construction approval and the transfer announcement are postponed, the more the association accumulates expenses for office operations, staffing, financing, and litigation. If infrastructure construction costs increase or settlement with the contractor drags on, total project costs can balloon, potentially leading to additional assessments on association members.

The Bank of Korea's Monetary Policy Board raised the benchmark interest rate Thursday by 0.25 percentage points to 2.75 percent per annum from 2.50 percent, citing price stability. Should another rate increase follow before year's end, the financing burden on stalled redevelopment sites is expected to grow even heavier.

A similar situation is unfolding at DH Firstier Ipark in Gangnam-gu, Seoul, the reconstruction of the former Gaepo Jugong Apartment Complex 1. The complex began accepting residents in November 2023 after receiving a temporary occupancy permit, but full construction approval has been delayed because work on some infrastructure — including a stormwater pipeline and a small park — remains unfinished.

Gangnam-gu granted partial construction approval last June covering the apartment buildings and neighborhood commercial facilities, but excluded the remaining stormwater pipeline work and other unfinished infrastructure from the approval's scope. The district office and the association agreed to complete the outstanding work by December. A full construction approval had been planned for June this year, but approval has still not been issued.

At least one case has produced concrete figures for the financial costs of registration delays. Changwon Central Park Eileen's Court in Changwon, South Gyeongsang Province — a reconstruction of the Daewon Zone 3 site — received construction approval last May, but the transfer announcement was delayed because the names on the building register and the management and disposal plan did not match.

As a result, ownership registration for 1,470 households and 65 commercial units was blocked, leaving residents unable to refinance into lower-rate loans. The association estimated the additional annual interest burden from the registration delay at around 5.4 billion won ($3.63 million).

Experts say preventing construction approval delays requires accounting for the risk of cost increases and schedule disruptions in the final stages of a project, rather than focusing solely on cutting construction costs upfront.

Kim Je-gyeong, director of Toomi Real Estate Consulting, said most construction approval delays occur because associations separate infrastructure work into independent contracts in an attempt to reduce costs. "By the time the infrastructure work begins, labor and material costs have risen, so contractors demand additional payments — and if that causes a delay in final approval, the association ultimately loses more than it saved," he said.

Kim added that entrusting infrastructure work to the primary contractor on a turnkey basis is the best way to reduce project risk. "The main contractor has negotiating leverage with subcontractors and established relationships across job sites," he said.