HUG to Provide 15 Trillion Won in Guarantees to Stabilize Housing Market

Improvement of Existing PF Guarantee Review Methods, 10 Trillion Supply
New Unsold Loan Guarantee Established... 5 Trillion Supply

[Asia Economy Reporter Minyoung Kim] The Korea Housing & Urban Guarantee Corporation (HUG) announced on the 3rd that it plans to provide a total of 15 trillion KRW in guarantees in 2023 to support the stabilization of the housing market through liquidity supply.

As part of the government's 'Real Estate Market Issue Response Plan,' HUG will supply 10 trillion KRW by improving the existing PF guarantee system and will newly establish a guarantee for unsold housing loans to support guarantees for unsold projects before completion, supplying 5 trillion KRW. The revised system has been fully implemented since the 2nd.

To ensure rapid PF guarantee supply, HUG has rationally improved the review methods and interest rate requirements of the existing PF guarantees.

Previously, all guarantee reviews required head office approval, but going forward, approval authority will be differentiated according to the review grade to shorten the review period. Additionally, the currently operated standard PF guarantee will be temporarily suspended until the end of this year (planned), allowing housing developers and financial institutions to autonomously set loan interest rates.

Considering the recent tightening of the short-term funding market, which has made it difficult for the housing industry to issue PF-ABCP refinancing, HUG will introduce a 'PF guarantee for repayment of already executed PF loans.'

If the loan maturity of a housing developer who raised funds through asset securitization approaches and investors for refinancing cannot be recruited, the developer can repay the already executed PF loan through a HUG-guaranteed loan and continue the project.

The requirements to receive this guarantee are that the sales rate of the project is 60% or higher, the construction defect rate is 5 percentage points or less, and the application can be made after the initial payment due date of the interim payment.

HUG has introduced the 'unsold housing loan guarantee' system to support the financing of construction funds for unsold projects before completion, which will be operated temporarily until the end of this year.

The unsold housing loan guarantee refers to a guarantee that takes responsibility for the principal and interest repayment when a housing developer raises project funds under the condition of making efforts to resolve unsold housing after the approval of the resident recruitment announcement.

The guarantee support target projects are those with a construction progress rate of 15% or more and projects for which HUG's sales guarantee has been issued. Guarantee applications can be made after the initial payment due date of the first interim payment.

The guarantee limit is within 70% of the appropriate sales price of unsold housing calculated by HUG, and up to 300 billion KRW will be supported depending on the credit rating of the contractor.

Lee Byung-hoon, Acting President of HUG, said, "We expect that this large-scale guarantee supply by HUG will greatly help stabilize the housing market, which has been struggling due to the recent increase in unsold housing and liquidity shortages. We will continuously monitor market conditions and make every effort to ensure that guarantees are supplied promptly and timely."