Ministry of Land, Infrastructure and Transport Offers Low-Interest Loans for Garojutaek Redevelopment Project Costs through Commercial Banks

IBK Industrial Bank Launches Loans at Around 2.9% Interest Rate to Support Garoju Housing Redevelopment

On the 20th, the Ministry of Land, Infrastructure and Transport announced that starting this year, it will support obtaining low-interest loans for project costs through private financing to revitalize the small-scale residential environment improvement projects known as Garo Housing Redevelopment Projects in urban areas.

The Garo Housing Redevelopment Project is a project that renovates the residential environment on a small scale while maintaining existing streets, roads, parks, and other infrastructure within a Garo district (an area surrounded by roads at least 6 meters wide) where old and deteriorated buildings are densely packed. As of January this year, 301 projects (with a supply scale of 35,000 households) are underway nationwide. The government plans to supply 110,000 houses through small-scale housing redevelopment projects, including Garo Housing Redevelopment Projects, by 2025.

Previously, in 2018, the government established a loan program for Garo Housing Redevelopment Project costs using the Housing and Urban Fund, and over the past four years, it has provided loans totaling 1.0219 trillion won to 180 project sites. However, with the recent revitalization of Garo Housing Redevelopment Projects, there were concerns that it would be difficult to flexibly respond to project demand due to fiscal conditions. In response, the Ministry of Land, Infrastructure and Transport explained that HUG (Housing and Urban Guarantee Corporation), the entrusted institution for public fund management (loan guarantees), and IBK Industrial Bank of Korea (low-interest loans) have collaborated to implement private loans for Garo Housing Redevelopment Projects and support project costs.

HUG and IBK Industrial Bank of Korea signed a "Business Agreement to Activate Financial Support for Garo Housing Redevelopment Projects" on the same day, and IBK plans to start offering loans for Garo Housing Redevelopment Project costs at an annual interest rate of 2.9% (as of January this year) within this month.

Accordingly, project implementers of Garo Housing Redevelopment Projects who receive loan guarantees from HUG will be able to borrow up to 50% of the total project cost from IBK (up to 90% if a purchase commitment for unsold houses is included). After obtaining a project cost loan guarantee certificate from HUG, loans can be obtained through IBK.

Additionally, loan guarantees are available for relocation costs and contribution fees incurred by landowners and others due to the Garo Housing Redevelopment Project. Relocation costs can be up to 70% of the previous land and building appraisal value, and contribution fees can be up to 70% of the total burden. However, loan approval and the annual interest rate will be determined through loan screening.

The Ministry of Land, Infrastructure and Transport plans to gradually expand various loan products through commercial banks besides IBK so that Garo Housing Redevelopment Project implementers can broadly choose suitable financing methods. Furthermore, it will regularly hold public participation-type Garo Housing Redevelopment Project contests where public implementers such as LH jointly carry out projects with associations, and continue regulatory improvements to revitalize the projects.