If Unsold Units Occur, LH Will Buy... 22 Trillion Won Purchase Commitment in the Seoul Metropolitan Area [8·8 Supply Plan]

Commitment to Purchase 36,000 Unsold Units in Public Housing Sites in the Seoul Metropolitan Area
Five Areas Including Gimpo Hangang 2 to Complete District Designation by First Half of Next Year
CR REITs to Address Unsold Units in Provinces... Launch in September

The government will implement a 'pre-sale unsold unit purchase commitment' for private construction companies starting construction on public housing sites in the Seoul metropolitan area. The intention is to encourage construction without hesitation by assuring that the Korea Land and Housing Corporation (LH) will purchase any unsold units. In provincial areas, a corporate restructuring (CR) REIT will be launched next month to alleviate the burden of unsold units. A CR REIT refers to a real estate investment trust whose investment assets are unsold housing units.

On the 8th at 2 p.m., the Ministry of Land, Infrastructure and Transport announced the 'Plan to Expand Housing Supply for National Housing Stability' at the 8th Real Estate Ministers' Meeting held at the Government Seoul Office. The plan includes accelerating construction and sales of existing public housing sites in the metropolitan area and resolving unsold units in provincial areas.

LH Buys Unsold Units in the Metropolitan Area to Support Youth Homeownership

The purchase commitment applies to 36,000 units on public housing sites developed by the Korea Land and Housing Corporation (LH) in the metropolitan area. If private companies start actual construction by next year and unsold units occur after completion, LH will buy them. The total scale is about 22 trillion won. The purchase price is calculated by adding the purchase commitment rate and asset ratio (up to 2 percentage points) and then multiplying by the actual sale price per unit. The purchase commitment rate varies between 85% and 89% of the sale price depending on the unsold rate, with a 1 percentage point difference applied per unit interval. An additional 1 percentage point is granted for construction started by the first half of next year to accelerate policy effects, and another 1 percentage point is added for large complexes with 500 or more units.

LH will supply the purchased homes as public housing such as New:Home Select Type to help homeless youth and newlyweds secure their own homes. The comprehensive real estate tax (hereafter, comprehensive tax) exclusion criteria will also be relaxed from a metropolitan area official price of 600 million won or less to 900 million won or less. Interested companies can apply within this month. Afterward, purchase agreements will be signed and the relevant complexes will be managed from the start of construction.

For 17,700 units (22 sites) supplied between 2018 and 2020 on the condition of post-sale, conditional pre-sale will be allowed for 4,500 units (6 sites) that have not held main subscription by July. Additionally, a pan-governmental inter-agency consultative body will be formed to promptly respond to issues causing project delays such as the relocation of military base transmission towers. For the Gwangmyeong-Siheung district in Gyeonggi Province (66,000 units), REITs (Real Estate Investment Trusts) funds will be injected after district plan approval in December this year to expedite compensation and construction.

For the metropolitan public housing candidate sites announced since 2022 (5 locations, 1.45 million units), the plan is to complete district designation by the first half of next year starting with Gimpo Hangang 2. Pyeongtaek Jije (33,000 units) is scheduled for the second half of this year, and Yongin Idong, Guri Topyeong, and Osan Segyo 3 (total 66,000 units) are planned for the first half of next year.

Photo by Yonhap News

CR REITs to Launch in September to Resolve Unsold Units in Provincial Areas

In provincial areas, the introduction of CR REITs will be fully launched next month. This system involves REITs invested in by developers, contractors, and financial investors (FIs) purchasing and operating unsold units to mitigate unsold risks.

The Ministry of Land, Infrastructure and Transport will support acquisition tax and comprehensive tax during the rental operation of unsold units by CR REITs and allow the Korea Housing & Urban Guarantee Corporation (HUG) mortgage guarantee subscription. The period from CR REIT registration to mortgage guarantee approval will not exceed 15 days. Credit evaluation of the REIT and appraisal of unsold units will be conducted in advance before guarantee application to shorten the period.

For housing developers facing difficulties with unsold units in provincial areas, HUG's unsold project financing (PF) loan guarantee limit will be temporarily expanded until the end of next year. Previously, the guarantee limit was divided based on exclusive area of 85㎡, but now guarantees up to 70% will be provided regardless of exclusive area. Also, if developers utilize unsold units as rental housing after provincial completion, acquisition tax will be reduced by up to 50%. Furthermore, a special provision will be granted that considers existing one-home owners who purchase unsold units for the first time after provincial completion by the end of next year as owning one home and one household.