From Next Year, Urban Regeneration Seed Loans Will Also Be Allowed for Mixed Residential and Commercial Building Projects

Allowing Residential Complexes up to 50% of Total Floor Area
"Securing Resident Population, Addressing Vacancy in Commercial Spaces"

Starting next year, when constructing commercial buildings in local old downtown areas, projects that include residential units within the building as a mixed-use development will be eligible to receive low-interest Urban Regeneration Seed Loans.

Ministry of Land, Infrastructure and Transport / Photo by Hyunmin Kim kimhyun81@

The Ministry of Land, Infrastructure and Transport announced on the 12th that from January 1st next year, the Urban Regeneration Seed Loan program will be restructured to apply this change. The Urban Regeneration Seed Loan is a system that provides low-interest loans from the Housing and Urban Fund to developers creating commercial and startup facilities in declining downtown areas (urban regeneration activation zones designated by local governments). Loans cover up to 70% of the total project cost for facilities under 10,000㎡ (up to 5 billion KRW for private projects and 10 billion KRW for public projects) for a period of 7 years (up to 12 years maximum).

From next year, the government will also provide Urban Regeneration Seed Loans for projects that include up to 50% of the building’s total floor area as residential units. Due to concerns about speculation, mixed-use projects including housing have been excluded from loan eligibility since 2020; however, this measure was taken to secure resident populations in local old downtowns and address vacant commercial space issues. For example, if a four-story building is constructed with commercial spaces on the 1st and 2nd floors and studio apartments or similar housing on the 3rd and 4th floors, it will be eligible for the Urban Regeneration Seed Loan. However, to prevent abuse of the system, the borrower, their spouse, or family members are prohibited from residing in the residential units. Additionally, the interest rate will be 2.2% per annum for commercial-only developments, and a provisional rate of 4.0% per annum will apply for mixed-use developments combining commercial and residential spaces.

The criteria for rent increase rates in loan screening will be significantly strengthened. To allow self-employed tenants who lease commercial spaces created through the Urban Regeneration Seed Loan to operate at affordable rents for extended periods, the scoring weight for rent increase rate evaluation will be increased. The ratio of rental supply will also be added as a screening criterion. Furthermore, the number of loan applications for effectively the same borrower, such as spouses or children, will be limited to one to prevent benefits from being concentrated on specific individuals.

When extending the loan maturity, borrowers will be required to partially repay the principal or pay an additional interest rate. The recovered principal and interest will be used to support new loans. However, sufficient grace periods will be provided for projects that have already received loans.

Jin-Hoon Jeong, Director of the Urban Policy Division at the Ministry of Land, Infrastructure and Transport, said, "For successful urban regeneration, free and creative activities by the private sector are essential. Through this restructuring of the Urban Regeneration Seed Loan, we hope that declining local commercial districts will be revitalized and self-employed business owners will be able to operate more stably."