KB Management Research Institute "Issue Worth Considering Inclusion of Jeonse Loan in DSR Calculation"

Policy for Managing Investment Demand

[Asia Economy Reporter Park Sun-mi] Advice has been raised that it is necessary to include jeonse deposit loans in the calculation of the Debt Service Ratio (DSR) to reduce the impact of increased liquidity from jeonse deposit loans on the housing market and to curb excessive investment demand.

On the 25th, the Real Estate Market Research Team at KB Management Research Institute stated in the "Policy Suggestions for Stabilizing the Housing Market" that "it is necessary to consider including jeonse deposit loans in the DSR calculation to reduce the impact of increased liquidity from the rise in jeonse deposit loans on housing prices."

The report said, "Although it is reasonable to exclude jeonse deposit loans from the DSR calculation because they can be repaid with the jeonse deposit returned at maturity, it is necessary to consider including them in the DSR calculation due to their greater impact on the housing market, such as the possibility of gap investment and the loan size per case." It added, "it is necessary to refer to cases such as applying DSR to maturity lump-sum repayment credit loans calculated with a 7-year maturity, and it is possible to consider including the jeonse deposit in the lessor's DSR calculation only for multi-homeowners as a measure to prevent gap investment," it suggested.

Currently, loans with separate repayment funds, such as savings-secured loans and insurance policy loans, are excluded from the DSR calculation. The financial authorities initially considered including jeonse deposit loans in the DSR regulation but decided not to apply DSR this time to protect the real demand of low-income households.

In addition, KB Management Research Institute proposed measures to restrict the handling of jeonse deposit loans when the sales-to-jeonse price ratio is 80% or higher to prevent losses on jeonse deposits in case of housing price declines, and to provide income tax deductions as an incentive for principal and interest repayment to borrowers to recover excessive market liquidity. To improve the current situation where financial institutions rapidly increase loans without bearing risks due to guarantees on jeonse deposit loans, it also suggested considering limiting jeonse deposit loan guarantees to youth, low-income, and vulnerable groups only.