Shindongah Construction headquarters (Image courtesy of Shindongah Construction)
SEOUL, Jan. 7 (Korea Bizwire) — The construction sector in South Korea is on edge after Shindongah Construction, a mid-sized builder known for its “Famille” housing brand, filed for court-led rehabilitation on January 6.
The company, ranked 58th in construction capability evaluations, is the largest in its tier to take this step amid a worsening market downturn.
A Signal of Broader Industry Troubles
Last year, 27 construction firms in South Korea declared bankruptcy, the highest number since 2019. While most of these firms were smaller, regional players, Shindongah’s insolvency has caused shock due to its reputation and size.
The company, famous for landmark projects like Seoul’s 63 Building in the 1980s, had exited a corporate workout program only five years ago, raising questions about the structural challenges in the industry.
The firm’s financial troubles have been attributed to a mix of market factors, including unsold inventory in its key projects, such as Jinju New Station Townhouses and high-rise mixed-use complexes in Uijeongbu.
Rising unpaid construction costs and failed project financing (PF) transitions for developments like the Songsan Green City Townhouses further exacerbated the crisis.
An industry insider explained, “This is the result of a combination of factors: stagnation in the regional housing market, plummeting demand for non-apartment projects, and rising construction costs.”
By the end of 2024, Shindongah Construction’s total debt had risen to ₩798 billion, up more than ₩100 billion from the previous year.
Wider Implications for the Industry
The collapse of Shindongah Construction has sparked fears of a domino effect across the industry, especially as liquidity issues plague other firms. Persistent challenges such as falling demand, surging construction costs, and PF market disruptions are creating a vicious cycle.
Key indicators point to worsening conditions: housing oversupply has led to a fivefold increase in unsold units over three years, while construction investments fell throughout 2024 and are forecast to drop another 1.3% in 2025, according to the Bank of Korea.
The Construction Business Sentiment Index (BSI) remains below 50, signaling pessimism across the sector.
With large firms increasingly entering public-sector projects traditionally dominated by smaller companies, mid-sized builders face even tougher competition. One industry expert remarked, “Even public projects, once ignored by major players, are now attracting large corporations, squeezing mid-sized firms out of the market.”
Government Interventions Fall Short
The South Korean government has introduced measures, including adjustments to public construction costs, to revive the industry. However, experts are skeptical of immediate relief. “Policy effects will take time, but the current liquidity crisis is immediate,” said an industry official.
The bankruptcy of Shindongah Construction underscores the fragility of the construction sector, with more companies potentially following suit. “The construction environment has been deteriorating for years, and many firms are barely hanging on,” said Park Chul-han, a researcher at the Construction Industry Research Institute.
With 2025 shaping up to be a critical year for the sector, industry insiders warn that without significant and timely intervention, the challenges faced by Shindongah Construction may become a harbinger of wider industry turmoil.
M. H. Lee (mhlee@koreabizwire.com)
