Tenants bear up

By Yi Whan-woo


State-run real estate developers in Pyongyang are asking prospective tenants to bear a part of the costs of a new apartment building even before construction begins, according to sources familiar with the matter.

This is because the construction companies are suffering from a cash shortage and want to secure a part of the financing from potential occupiers.

"Construction of a new 12-story apartment building will begin in spring on the outskirts of Pyongyang, and half of its tenants have already been decided on," a source said. "Those who want to live there reserved their new home with dollars. The construction firms came up with this idea of early payment to overcome the lack of initial capital."

The early payment is at least $10,000, with the amount varying depending on the unit's floor in the apartment building.

"For instance, it costs $10,000 to reserve a home on the first floor, $30,000 on the fifth to seventh floors and $8,000 on the 11th floor," the source said.

The source said the middle floors are most popular because people would have to climb stairs when the electricity fails and elevators do not work.

"It will be tough to go up all the way up to the top floor of a 12-story apartment in the case of a power failure," the source said.

When the framework of their apartment is completed, occupiers must pay a second sum that is twice as much as their initial payment.

The location of the apartment building in Pyongyang is critical in drawing the pre-paying tenants, securing a significant portion of the financing and consequently, starting construction as soon as possible.

"People are willing to pay for an apartment on the 12th floor of an apartment building if it is close to public transport and therefore has easy access to downtown Pyongyang," the source said.

The real estate developers are under state control and must give a part of their earnings to the cash-strapped regime.

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