INVESTIGATION CONTINUES OVER HWACHEONDAEYU

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A firm that collected massive dividends in a development project in Seongnam that began when presidential candidate Lee Jae-myung was mayor of that city also appears to reap huge gains from housing sales. This is because the firm Hwacheondaeyu directly put up for sale houses on five sites accounting for nearly 30% of the entire Daejang district in Seongnam. How was this double profit scheme from both dividends and sales possible? Let's take a look

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Groundwork construction is under way at this site in Daejang-dong, Seongnam city, Gyeonggido Province where 290 homes are set to be built. According to subscription applications which closed earlier this month, the popularity among home buyers is overheated at a competition rate of 300 to one. Signing of pre-sale contracts kicked off Wednesday to the tune of 34.4 million won on average per 3.3 square meters, a record high for Seongnam city. Industry watchers project a profit margin of about 100 billion won excluding construction costs. As the homes are considered to be a special type of urban housing, a cap on pre-sales prices do not apply. Hwacheondaeyu is responsible for the sales of five out of 15 districts in the Daejang-dong development project. Four apartment complexes with 19-hundred units that went on sale 3 years ago had an average price tag of around 20 million won per 3.3 square meters. According to an audit report, as of late 2020, Hwacheondaeyu earned over 235 billion won in pre-sales profit. Pre-sales prices for newly built apartments are typically lower than the going market rate but local realtors said that was not the case for Daejangdong.

[Soundbite] (Local realtor(VOICE MODIFIED)) : "Original residents of the site were not compensated enough while the developers set a sales price (that was pretty high) and gained hefty profit."

When the project first broke ground in 2015, private investors taking part in the development could receive plots of land within the bounds of their investment amount. It was a government-provided incentive to facilitate the real estate market.

[Soundbite] Kim Nam-geun(People's Solidarity for Participatory Democracy) : "Hwacheondaeyu was well aware of the laws at the time and took over the land in a private contract at a price 30% lower than what it would have been in competitive bidding. It then went on to reap a large profit from development."

In response, Hwacheondaeyu said sales earnings of as much as 450 billion won as reported by some media outlets is not true, and that it earned about 40 billion won in sales commission and profit from 4 housing sites.