[Exclusive] Construction Costs Rise Despite ‘Reduction Recommendation’... A Look at the Site

[Financial News] #. Redevelopment Site A in Eunpyeong District, Seoul. In the third quarter of 2024, it received a verification result from the Korea Real Estate Board (KREB) deeming a construction-cost increase of 165.6 billion won appropriate. The amount initially submitted for verification was 186.6 billion won, meaning 11.3% of the total was cut.
However, in the second quarter of the following year, 2025, the redevelopment association at the site agreed with Contractor B on a construction-cost increase contract worth approximately 250 billion won. This was more than 100 billion won above the amount verified by KREB.
Most redevelopment projects that applied to KREB for construction-cost verification received a “reduction recommendation,” yet sites that signed contracts for higher amounts are also readily found. That is because there are no legal penalties or other regulations for failing to follow the verification results.
At some sites, redevelopment associations and contractors have even agreed to exploit the verification process. Criticism is growing that the system has effectively degenerated into a mere sham.
■ Recommended Reduction Amounts Are Rising, but What Is Happening at the Sites?
According to Financial News reporting on the 10th, KREB recommended reductions totaling 4.701 trillion won in construction costs through its verification of redevelopment projects over the past five years. The amount has increased every year.
It stood at just 430 billion won in 2022, but rose steadily to 646.1 billion won in 2023, 791.3 billion won in 2024, and 1.7214 trillion won in 2025. This year, it had already surpassed 1 trillion won, reaching 1.1122 trillion won as of August.
Judging by the figures alone, the system appears effective. But the story from the sites is entirely different.
Because there are no legal penalties for failing to implement the recommendations, many do not follow them. In some cases, redevelopment associations and contractors even apply for verification at amounts higher than actually needed, anticipating the reduction.
Project Site B, located in the three Gangnam districts (Gangnam, Seocho and Songpa) of Seoul, is one such case. The complex is a so-called “large-scale complex” with several thousand households, and it was highly popular from the time it was offered for sale.
The association and contractor at the complex have agreed to construction-cost increases at least three times so far. During this process, they added the amount expected to be cut to the amount needed and submitted the inflated figure to KREB for verification. For example, if 100 billion won were needed for a construction-cost increase, they would apply for verification of 110 billion or 120 billion won, factoring in an expected reduction of 10–20%.
Project Site B used this method to finalize the full amount of construction costs it needed. An official in the construction industry said, “If the contractor and the association agree, there is no way to identify cases like this. The fact that such workarounds are already being used openly shows that the system has many loopholes.”
■ Only 30% in Seoul... As Many as 70% in Other Regions
Since construction-cost verification is conducted nationwide, there are likely to be many more similar cases. KREB verified 179 sites over the past five years, of which 55 were in Seoul—only about 30%.
Gyeonggi Province had 41 sites, Busan 21, and Incheon and Daejeon 13 each. The remaining 70% were concentrated in areas outside Seoul, including other parts of the capital region and other regions. Numerous projects in each region had construction-cost verification amounts exceeding several hundred billion won.
That is why calls are growing for the system to be reformed without delay. A real-estate expert who requested anonymity advised, “More than 4 trillion won in redevelopment projects underwent construction-cost verification by KREB this year alone. With many redevelopment projects planned nationwide, including in the ‘Apyeomokseong’ area—Apgujeong, Yeouido, Mokdong and Seongsu-dong—we need to fix the loopholes in the current system.” [email protected] Jun-ho Kwon Reporter