[9·26 Supply Measures] Relief for Non-Apartment Construction Financing... Increase in Price Standards for Small Housing

New Construction Guarantee by Construction Guarantee Association for Viapate Projects
Considered Non-Homeowners Small Houses in Seoul Metropolitan Area Priced at 160 Million KRW
Preventing Disputes Between Association and Construction Companies to Accelerate Projects

Funding procurement through guarantees from funds and the Construction Mutual Aid Association will become possible for non-apartment projects such as row houses, multi-family housing, and officetels. The publicly announced price criteria for small-sized houses, which are considered as non-homeowners during subscription, will be raised to 30 million KRW in the metropolitan area and 20 million KRW in provincial areas. For redevelopment projects, the process will be simplified to shorten the duration.

A view of the one-room tel dense area in Noryangjin-dong, Dongjak-gu, Seoul. / Photo by Jinhyung Kang aymsdream@

On the 26th, the Ministry of Land, Infrastructure and Transport announced in the "Housing Supply Activation Plan for National Housing Stability," jointly with related ministries, that it will improve conditions for non-apartment projects capable of short-term supply to dispel concerns about housing supply shortages.

First, the Ministry of Land, Infrastructure and Transport decided to temporarily support non-apartment construction funds from the fund for one year. The loan limit is 75 million KRW per household, with an interest rate as low as 3.5% per annum. If the developer constructs and utilizes non-apartments as publicly supported private rental housing, they can receive loans ranging from 90 million to 140 million KRW, which is higher than the existing 70 million to 120 million KRW. When constructing rental dormitories in urban areas included in the rental housing registration target, additional benefits such as reductions in acquisition tax, comprehensive real estate tax, and capital gains tax will be provided.

A guarantee system from the Construction Mutual Aid Association will also be newly established. The association will provide performance guarantees for the construction company's responsibility to complete the project when real estate project financing (PF) loans are taken, and the introduction of payment guarantees for developer loans (main PF and mortgage) is also being pursued. Each is on the scale of 3 trillion KRW.

As part of regulatory improvements, the publicly announced price criteria for small-sized houses considered as non-homeowners during subscription will be raised from 130 million KRW to 160 million KRW in the metropolitan area and from 80 million KRW to 100 million KRW in provincial areas. This corresponds to about 240 million KRW in metropolitan market prices. This is the first change in the criteria set in 2015 in eight years, increasing the number of non-homeowners eligible for policy benefits such as special supply for first-time homebuyers.

Additionally, small-sized housing combining residential and shared mobility will respond to urban demand while minimizing traffic impact. For urban-type residential housing (exclusive area of 60㎡ or less) constructed within 500 meters of commercial or quasi-residential area subway stations, relaxed parking space requirements will apply when shared vehicles are used, and additional incentives will be provided if a dedicated shared mobility space is established.

Deputy Prime Minister and Minister of Economy and Finance Choo Kyung-ho (center), Minister of Land, Infrastructure and Transport Won Hee-ryong (right), and Chairman of the Financial Services Commission Kim Ju-hyun are announcing the "Measures to Revitalize Housing Supply" on the 26th at the Government Seoul Office in Jongno-gu, Seoul. / Photo by Jo Yong-jun jun21@

The procedures for redevelopment and reconstruction projects will also be shortened. Amid frequent disputes between associations and construction companies due to rising construction costs caused by recent raw material price increases, the plan is to prevent such conflicts by supporting consulting from specialized institutions at the contract signing stage and establishing a dispute mediation council. Furthermore, a standard contract reflecting essential items such as criteria for construction cost increases will be prepared at the contract stage, and local governments will be able to request verification of construction costs.

Disputes between commercial and residential property owners will be prevented by applying the same rule of dividing shares as in residential properties. Currently, for residential properties, the date of the local government head's announcement is the right assessment date, and shares divided after that date do not grant pre-sale rights; the same urban maintenance law will be applied to commercial properties.

Moreover, the Ministry of Land, Infrastructure and Transport plans to accelerate redevelopment projects by mandating the prior presentation of maintenance plan guidelines when designating zones and simplifying the procedures for designating special architectural districts. The trust method will shorten the project period by up to three years through easing requirements for designating implementers and integrating maintenance and project plans.

In addition, for small-scale maintenance projects, donated land is excluded from the project implementation area requirement (upper limit of 10,000㎡). When the public participates in small-scale management areas to integrate adjacent zones, the maximum area limit will be relaxed from the current 20,000㎡ to 40,000㎡ or less. Fund loans (50-70% of project cost, interest rate 1.9-2.2% per annum) will also be supported without disruption.

Jin Hyun-hwan, Director of the Housing and Land Office at the Ministry of Land, Infrastructure and Transport, said, "This measure focuses on resolving concerns about funding procurement, unsold inventory, and construction costs from the supplier's perspective," adding, "It is difficult to predict whether the market situation is in a major upward phase or a temporary and localized rise, so we are sensitively monitoring the supply and demand aspects."