Government legislation ministry says financial standard applies at proposal stage

The government legislation ministry said that developers seeking to propose an urban development zone must meet financial-soundness standards when submitting the proposal, rather than only when seeking designation to lead the project.

The interpretation, requested by Cheongju in North Chungcheong Province, concerns businesses registered under the Housing Act that seek to develop housing complexes and related infrastructure.

The ministry said the qualifications for proposing a zone and for being designated its operator are based on the same requirements. It said limiting proposals to entities able to carry out the project allows financially capable developers to participate from the outset.

Rules require a proposed zone's application to include a development plan covering the project method and period, proposed operator, financing plan, land-use and land-acquisition plans, as well as documents on basic surveys including land measurements. Authorities may give priority to a proponent when designating an operator, while private developers making proposals must obtain consent from owners of at least two-thirds of the land in the target area.

To qualify, a corporation must have no net loss in the income statement for the relevant year. Where that statement has not been disclosed, the assessment uses the prior year's income statement.

Although the rule identifies the operator-designation application date as the reference date for the standard, the ministry said that wording does not exclude assessment at the proposal stage. It said allowing financially unsound corporations to make proposals could undermine the stable implementation of urban development projects.

The government legislation ministry also recommended revising related rules and forms to specify the assessment date.