South Korean builders force staff to buy unsold apartments or how South Korean builders improve their cash flow.
Builder builds apartments. Apartments do not sell. Builder asks staff to take out loans and buy the apartments, which helps the builders’ cash flow.
An office worker at Byucksan Engineering & Construction Co Ltd, Kim Keon-hoon said he was also pushed in 2008 to buy an unsold 800 million won two-bathroom, four-bedroom apartment in the Ilsan suburb outside Seoul as his employer teetered on the edge of bankruptcy.
Mortgages are commonly taken on by workers to provide cash-strapped companies with liquidity, and interest payments are usually shouldered by the firms.
The purchase has saddled the father of two with debts of 500 million won and monthly interest payments of 3 million won that he cannot repay. Kim and other employees say they were coerced to buy and have taken the company to court.
Until the construction sector revives, some parts of the industry are likely to put pressure on employees to buy, banking on the same spirit of self-sacrifice that saw people sell their jewelry to help the government pay back a $57 billion loan from the IMF during the Asian crisis in the 1990s.
A broken system.
Tags: south korean construction firms