Real Estate Development Association President's Press Conference
Regulatory Improvements Needed to Sustain Supply of Non-Apartment Housing and Officetels in Urban Areas
to Stabilize the Jeonse and Monthly Rent Market
The Korea Real Estate Development Association, the representative organization of real estate developers, demanded that the government step in to normalize project financing (PF), stating, "Projects that have already received permits should be able to proceed smoothly through proper funding." On the 18th, Kim Seung-bae, chairman of the Korea Real Estate Development Association, held a briefing for reporters from the Ministry of Land, Infrastructure and Transport in Sejong City, emphasizing, "The top priority to improve the supply environment in the current market situation is the swift normalization of main PF."
In the early stages of real estate development, the risk of the project is high, so developers raise funds at high interest rates through secondary financial institutions. This borrowing is called a 'bridge loan.' After securing the site and completing permits, construction begins. As the project progresses and risks decrease, the high-interest bridge loan can be converted into a lower-interest loan from primary financial institutions, which is called the 'main PF.' The more projects that move to the main PF stage, the more actual completions can increase.
Chairman Kim stated, "The normalization of main PF announced by the Financial Supervisory Service along with the criteria for cleaning up insolvent projects is perceived very little in the market," and added, "Normalization of main PF for sound projects must be promoted." He also noted, "Over the past two years, the supply environment for residential and non-residential properties has deteriorated due to high interest rates, rising construction costs, and difficulties in funding, and it has not yet improved." According to last year's real estate development business performance report, sales dropped by 39.3% compared to the previous year to 28.7152 trillion KRW, and the development area decreased by 21.2% to 19.448792 million square meters.
Chairman Kim said, "To stabilize the rental market, which is expected to become unstable due to future supply shortages, it is necessary to ensure continuous supply of non-apartment housing and officetels that contribute to stabilizing the monthly rent and lease market in urban areas." He emphasized, "Institutional improvements such as excluding small housing like non-apartments or quasi-housing from the housing count, easing tax regulations for multi-homeowners, and benefits for rental business operators are needed," adding, "Through this, rental business operators should be attracted to contribute to stabilizing the monthly rent and lease market."
For the advancement of the real estate development industry, he called for the government to introduce a 'performance reporting system.' This system would have a credible institution verify the business performance of registered real estate developers. Chairman Kim said, "This will secure expertise and transparency, leading to the 'qualitative growth' of the development industry," and added, "Competent developers will participate in creating large-scale urban spaces such as urban complex development, station area development, railway undergrounding and upper development, and renovation of aging planned cities."
He also requested an expansion of opportunities for project participation. He explained, "Currently, due to the requirements of related laws on maintenance projects, small-scale maintenance projects, and urban complex development projects, direct participation by developers is impossible," and said, "To meet the spatial demand of the market, registered real estate developers should have equal status with housing registrants or construction companies."
He mentioned the need to expand channels for investor inflow. Chairman Kim said, "If various investor inflow channels such as equity financing systems are established, the increase in the equity ratio will naturally occur in the market."
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