'Stop sitting on land, start building' — developers to get levy waiver for breaking ground by end of next year

The government and ruling party are pushing to exempt developers from development-profit levies if they break ground on residential projects by 2027. The measure is designed to accelerate housing supply and is expected to prompt developers to rush construction starts in a bid to maximize returns. Some analysts, however, doubt the policy will deliver a meaningful direct boost to supply.

Eighteen lawmakers of the Democratic Party of Korea filed an amendment to the Development Profit Recovery Act on Friday, the National Assembly said. Under the bill, development levies would be waived entirely for residential projects that break ground by 2027, while projects beginning construction by 2028 would receive a 50% reduction — both as temporary relief measures.

The bill is part of the government's Aug. 13 housing supply package, under which the Ministry of Land, Infrastructure and Transport pledged a range of incentives to help developers accelerate construction starts. The development levy, introduced in 1990 to recapture land-value gains, has been subject to periodic temporary reductions depending on housing supply conditions. With ground-breakings now deemed critically insufficient, the relief measures are set to take effect from next year.

Under the Development Profit Recovery Act, the types of projects subject to the levy include residential land development — including housing complex development — industrial complex development, tourism complex development, urban development and regional development as well as urban environment improvement projects, transportation and logistics facility site development, and sports facility site development.

Of these, the exemption applies to projects building detached houses, apartment buildings and quasi-residential units under the Housing Act. Redevelopment and reconstruction projects under the Act on the Maintenance and Improvement of Urban Areas and Dwelling Conditions are not included, though some redevelopment projects classified as urban environment improvement projects may still qualify. The bill's broader aim is to lower the levy burden across housing projects and speed up construction starts.

"The target is private-sector sites where land has been prepared for apartment development but construction has not started," a Ministry of Land, Infrastructure and Transport official said. "The intent is to stimulate supply on idle land that is just sitting there."

While the government and ruling party plan to push the bill through to accelerate housing supply, industry observers say levy relief alone has inherent limits as a supply driver. They point out that the main causes of delayed construction starts in the private sector — rising construction costs and difficulty securing project financing — would not be addressed by development levy cuts alone.

Seong Jung-tak, a professor at Kyungpook National University School of Law, said the measure "is expected to have a positive effect in bringing forward ground-breakings for private projects that are on the borderline of viability." He added, however, that "development levies are in principle assessed and imposed after a project is completed, so this is not a policy that lowers the immediate costs of land acquisition, project financing or construction."

Under the current law, the levy rate is set at either 20 percent or 25 percent of development profit, depending on the type of project. If the bill passes, developers who break ground next year would be exempt from the levy entirely, while those starting construction in 2028 would see their rate cut to 10 percent or 12.5 percent.

Some observers also raise concerns that using ground-breaking as the qualifying threshold could lead to token construction starts that never translate into actual housing supply. Questions about post-project oversight — including whether levies could be reimposed on projects that suspend construction for extended periods or revise their plans after receiving the reduction — have also emerged as key issues.

"There is no guarantee that the savings from the levy reduction will be passed on through lower pre-sale prices or expanded supply," Professor Seong said. "In areas with constrained supply, the anticipated benefit may be priced into land values in advance, with the gains going to landowners rather than buyers."