PF Project Feasibility Evaluation to be Conducted by Early July... Starting with Areas Having Many Delinquencies and Maturity Extensions

By early July, project viability evaluations for real estate project financing (PF) sites will be conducted according to revised standards. Additionally, by the end of next month, a series of institutional improvements for PF restructuring?such as amendments to lender consortium agreements, syndicate loan formation by banks and insurance companies, and regulatory easing?will be finalized following the viability assessments.

On the morning of the 23rd, the Financial Services Commission held the '1st Real Estate PF Soft Landing Measures Review Meeting' at the Bankers' Hall in Jung-gu, Seoul, chaired by Secretary-General Kwon Dae-young, with related agencies including the Financial Supervisory Service, Ministry of Economy and Finance, and Ministry of Land, Infrastructure and Transport to discuss these matters.

At the meeting, they reviewed the detailed implementation schedules related to the 'Future Policy Directions for an Orderly Soft Landing of Real Estate PF' announced on the 14th and gathered opinions from the construction industry.

Accordingly, the authorities decided to revise sector-specific model regulations and internal rules related to PF project viability evaluation standards by early next month. By early July, each financial institution will conduct project-specific viability evaluations based on these standards. The evaluations will be carried out sequentially, starting with projects that have many delinquencies or maturity extensions.

Regarding lender consortium agreements, amendment drafts will be shared and opinions collected from financial associations by early next month, with plans to revise financial sector agreements and sector-specific agreements (including savings banks, specialized credit finance companies, mutual savings banks, and Saemaeul Geumgo) by the end of next month.

Furthermore, the syndicate loans formed by banks and insurance sectors will have detailed operational plans prepared through about one month of discussions within the consultative body launched on the 14th, aiming to start operations around mid-next month.

To support this, the authorities plan to issue non-action letters within this month for temporary financial regulatory relaxations that can be implemented first, including ▲exemption of liability for employees related to fund supply, restructuring, and liquidation ▲temporary easing of the Net Capital Ratio (NCR) risk weights for residential real estate loans ▲temporary easing of NCR risk weights related to debt guarantee loan conversions ▲relaxation of securities holding limits on PF loans.

Other regulatory easing measures, such as ▲allowing normal asset classification when supplying new funds ▲applying relaxed viability evaluation standards when supplying new funds ▲rationalizing K-ICS (risk factors) for PF normalization support ▲recognizing repurchase agreements (RP) sales for liquidity management before and after PF loans, will have non-action letters issued by the end of next month.

Since last month, the light and public auction standards pre-applied in the savings bank sector will be expanded to mutual savings banks and Saemaeul Geumgo by the end of this month after industry consultations.

The Korea Asset Management Corporation (KAMCO) fund is consulting with asset managers on granting preemptive purchase rights by the end of this month, aiming to introduce this from investment lines starting next month. Additionally, asset acquisition through participation in light and public auctions, approval for up to 440 billion KRW in new fund lending, and temporary reductions in acquisition tax are also being pursued.

Separately, the Korea Housing Finance Corporation (HF) plans to launch products related to additional guarantees for increased construction costs due to current cost rises by June. The Korea Housing & Urban Guarantee Corporation (HUG) can increase PF guarantee amounts for already approved projects after review, and for other projects, it will supply guarantees for additional construction costs through temporarily operated PF loan guarantees for unsold housing (unsold loan guarantees).

Meanwhile, the meeting also heard opinions from the construction industry regarding the real estate PF soft landing measures. The construction sector requested the use of various indicators and the application of relaxed evaluation standards for viability assessments. They also proposed the prompt implementation of non-residential PF guarantees, improvement of excessive PF fees, and expansion of policy funds to supply liquidity.

The authorities plan to hold meetings every two weeks to continuously monitor the PF soft landing measures. The Financial Services Commission stated, "Going forward, financial authorities and related agencies will collect opinions from the financial and construction industries on real estate PF soft landing measures on a biweekly basis and closely monitor the progress and schedules of detailed measures. In addition to the measures already announced, we will actively discuss any additional necessary steps to ensure the soft landing of real estate PF."