[9·26 Supply Measures] 'Loan Guarantee 25 Trillion Won' and 'Continuous Funding Supply' for Real Estate PF

Announcement of Measures to Revitalize Housing Supply for National Housing Stability

On the 27th, Kim Ju-hyun, Chairman of the Financial Services Commission, Lee Bok-hyun, Governor of the Financial Supervisory Service, and other key attendees who participated in the PF Lenders Agreement Ceremony held at the Bankers Association Building in Myeongdong 1-ga, Jung-gu, Seoul, took a commemorative photo after the ceremony. The event was attended by Kim Ju-hyun, Chairman of the Financial Services Commission; Lee Bok-hyun, Governor of the Financial Supervisory Service; Kim Cheol-ju, Chairman of the Financial Creditors Adjustment Committee; Kim Kwang-soo, Chairman of the Bankers Association; Jung Hee-soo, Chairman of the Life Insurance Association; Jung Ji-won, Chairman of the General Insurance Association; Jung Wan-gyu, Chairman of the Credit Finance Association; Oh Hwa-kyung, Chairman of the Korea Federation of Savings Banks; and Lee Chang-hwa, Executive Director of the Korea Financial Investment Association.
Photo by Yoon Dong-ju doso7@

Regarding real estate project financing (PF) businesses, the guarantee for PF loan guarantees will be expanded for normal projects, and funding supply will continue. New funds will also be provided to projects that are distressed or at risk of distress.

On the 26th, the Financial Services Commission and the Ministry of Land, Infrastructure and Transport announced the "Plan to Revitalize Housing Supply for National Housing Stability." First, to enable normal projects to smoothly raise funds, the guarantee scale of the Housing and Urban Guarantee Corporation (hereinafter HUG) and the Korea Housing Finance Corporation (hereinafter KHFC) will be expanded, and the screening criteria will be improved.

Expansion of PF Guarantees

The scale of PF loan guarantees will increase from the original 15 trillion won to 25 trillion won. HUG will handle 15 trillion won, and KHFC will handle 10 trillion won. To stably support HUG's guarantee capacity, capital reinforcement including government investment will be carried out simultaneously.

The loan limit for PF loan guarantees (including securitized bonds) will be expanded to up to 70% of the total project cost, allowing HUG to support project operators in securing additional funds.

The PF guarantee screening criteria will be relaxed by removing the contractor ranking limit and credit rating requirements, and the scope of guaranteed projects will be expanded. Currently, the contractor ranking limit is up to 700th place, but this will be abolished. Credit scores will also be raised according to credit ratings. Additionally, the requirement for upfront equity investment will be relaxed from "currently 10% of land cost" to "5% for contractors ranked within the top 100, and 10% for others."

Among the guarantee requirements for unsold PF guarantees, the 5% discount on sale price will be supplemented by recognizing indirect support such as "balcony expansion, optional items, and realistic construction costs."

Expansion of Financial Supply

Financial supply will continue for normal projects. A PF Adjustment Committee will be operated to mediate disagreements when delays occur due to increased construction costs or high interest rates in public-private joint projects.

Policy financial institutions will additionally expand the guarantee and primary collateralized bond obligation (P-CBO) purchase limit for construction companies by 3 trillion won. They will support real estate PF and construction companies with a total scale of over 7.2 trillion won.

The remaining funds in the support programs for PF projects and construction companies by the Korea Development Bank, Industrial Bank of Korea, and Korea Credit Guarantee Fund amount to 4.2 trillion won, and an additional 3 trillion won will be expanded for guarantees for small and medium construction companies and the P-CBO sector.

[Image source=Yonhap News]

Influx of New Funds

For projects that are distressed or at risk of distress, new fund inflows will be supported to proceed with project restructuring. The creditor group agreement will continue to operate to promote restructuring measures such as maturity extension, interest deferral, and debt adjustment. As of the end of August this year, it has been applied to 187 projects, with restructuring underway in 152 projects.

The PF normalization fund supplying new funds to restructured projects will be increased from the original 1 trillion won to over 2 trillion won. The Kamco Fund, matched 1:1 by private investors including the Korea Asset Management Corporation and the five major financial holding companies, was completed in September with a scale of 1.1 trillion won. Bidding for purchases targeting projects that have completed due diligence has begun.

The financial sector itself will also establish a fund of about 1 trillion won to independently select and support projects requiring PF restructuring. KHFC will provide preferential PF guarantees (increasing guarantee ratio from 90% to 95%) to PF normalization fund underwriters as an incentive for project normalization. The loan limit will also be expanded from 70% to 80% of the total project cost.

Support for Interim Payment Loans

The HUG interim payment loan guarantee responsibility ratio will be expanded from the current 90% to 100% to support commercial banks in implementing interim payment loans. Additionally, during bank sector interim payment loan screening, the practice of applying excessively conservative standards based on initial sales rates will be reviewed to ensure rationalization.