Of 14 recent sales contracts at Gaepo Jugong Complexes 6 and 7 in Seoul’s Gangnam-gu, 10 — 71.4% — were structured with the seller lending the buyer the balance of the sale and registering a collateral mortgage against it, according to an analysis of the deals by real estate commentator Danhee Ssaem (Lee Eui-sang) on his YouTube channel, Danhee TV. The loans ranged from roughly 1.8 billion to 2.4 billion won (about $1.3 million to $1.8 million) per deal. Sellers are not doing this out of generosity: they are absorbing a buyer’s financing risk to land their own sale on the favourable side of a tax deadline.
Two separate rules collide to produce this workaround. First, mortgage lending in Seoul’s regulated zones is capped at 200 million won (about $150,000) for homes valued above 2.5 billion won — far short of the balance buyers need to raise on multi-million-dollar redevelopment units, leaving banks unable to bridge the gap. Second, Gaepo Jugong Complexes 6 and 7 received approval of their management and disposal plan on 8 October, and under Korean tax law, a seller’s eligibility for a special long-term holding deduction on capital gains — worth up to 80% of the entire gain for a qualifying one-home-per-household owner — depends on registering the ownership transfer before that approval date. After the approval date, the unit is reclassified from a home to an “occupancy-right premium,” and the deduction drops to zero on gains above the property’s officially appraised value, which Danhee Ssaem estimates at only 60-70% of actual market price. A one-day difference in registration timing can therefore mean a tax gap of hundreds of millions of won.
With bank financing blocked and the clock running against the approval date, sellers are financing buyers directly to close deals before the deadline — accepting the legal and credit risk of transferring ownership before they have been paid in full. The exposure is not one-sided: buyers who fail to repay the seller’s loan risk having their occupancy right sent to auction, and the arrangement can draw scrutiny from South Korea’s Ministry of Land, Infrastructure and Transport over real-transaction reporting, or trigger gift-tax questions if the loan is interest-free.
Zagdim’s View — The detail worth remembering is not the size of the loans but why they exist: Seoul’s redevelopment tax rules reward sellers who register a sale before a specific approval date, while separate lending caps make it hard for buyers to raise that money through a bank in time. Danhee Ssaem’s reading is blunt — sellers “didn’t lend billions of won out of kindness” — and the same registration-date mechanics could reappear wherever another Seoul redevelopment complex nears its own management and disposal plan approval.
