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| Kim In-song, co-founder and chief strategy officer of Dongnae / Courtesy of Dongnae |
By Baek Byung-yeul
Kim In-song, co-founder and chief strategy officer at local property-tech startup Dongnae, said the company aims to capitalize on the country's growing market for monthly rent housing as more tenants are using the monthly rental system instead of Korea's unique "jeonse" or lump-sum deposit lease contracts.
"Recently, landlords have preferred monthly rent for raising income. Tenants are also increasingly looking for monthly rent due to increased lease deposits, interest rate hikes and stricter regulations on jeonse loans," Kim told The Korea Times during a recent interview in Seoul.
Korea's jeonse system is a unique financing tool in which tenants pay a landlord a lump-sum deposit for the entire period of a contract. Then the landlord returns the money when the contract expires, usually after two years. In the meantime, the landlord earns interest off of the lump sum.
Jeonse contracts have been decreasing steadily since the early 2000s, as housing costs have risen and as a result of low interest rate policies. Additionally, after the Democratic Party of Korea (DPK) enacted laws in July 2020 that allow tenants to renew their two-year jeonse contracts once while putting a cap on the amount, the number of jeonse contracts further declined from around 58.3 percent of Seoul's lease contracts in 2020, to 54 percent in 2021.
Kim and Matthew Shampine, the former general manager of WeWork Korea, established the prop-tech startup in 2020, noting that increasingly more landlords prefer the monthly rent system over jeonse contracts. The average monthly rent for a one-bedroom flat in Seoul was 510,000 won ($391.07) in February 2021, whereas the average lump-sum jeonse deposit for an apartment in Seoul was 627 million won ($480,732) as of June 2021.
"Dongnae is a company that provides housing rental management services. We have a unique business model that did not exist in the real estate market here. Our business structure is slightly different from other real estate brokerage platforms as we rent high-priced new apartments in the Seoul metropolitan area from landlords and then rent the apartments to our users again at a deposit of around 15 million won on average, which is about 98 percent lower than Seoul's average deposit for monthly rent," Kim said.
"Through our Dongnae FLEX program, we supply newly built apartments in Seoul and Pangyo in Gyeonggi Province with a deposit of around 10 million. The company currently manages more than 150 apartments in around 80 apartment complexes in these areas," the CSO added.
Since all apartments are carefully selected by experts, the apartments the company rents out not only meet high quality standards, but also simplify the preparation process before moving in by providing various services for tenants such as cleaning, plastering, internal inspection and facility repair.
"Our company not only guarantees monthly rent income for landlords by renting an apartment directly from them, but also replaces troublesome tasks such as apartment management through our professional management system. In addition, when re-renting the apartment to tenants, we recruit tenants with high credit quality by using our own credit analysis system," he said.
Revealing the company's next plan, he said Dongnae plans to expand the scope of its rental areas. The company also plans to launch smartphone apps so that tenants will be able to use its rental system more conveniently.
