Repurchase Condition Within One Year After Completion...
"Encouraging Self-Rescue Efforts"
Breathing Room for High-Interest Bridge Loans...
Government-Led 'Development Anchor REITs' Established
Job Creation...
Early SOC Project Starts and Expansion of Small-Scale Construction
The government is resuming the 'repurchase-conditional unsold apartment purchase program,' in which it buys unsold apartments in provincial areas before completion at 50% of the sales price, and then the construction company repurchases them. This policy, first implemented right after the 2008 global financial crisis, is being revived after 12 years. The aim is to supply liquidity to provincial areas where the housing market downturn has become severe, to prevent construction company bankruptcies, and to avoid incidents involving sales guarantees.
On June 19, the Ministry of Land, Infrastructure and Transport (MOLIT) announced that out of the 2.7 trillion won supplementary budget allocated for revitalizing the construction industry, 2 trillion won falls under its jurisdiction. This accounts for 10% of the total supplementary budget. Of this, about 800 billion won is earmarked for fiscal support to supply liquidity for project financing (PF). The remainder will be used for early commencement of social overhead capital (SOC) projects and expansion of small-scale construction of national and public facilities.
To address the liquidity crunch in the PF market, the government will use three tools: purchasing 10,000 unsold apartments in provincial areas, introducing a special PF guarantee (new), and establishing a development anchor REITs (new), to induce a total liquidity supply of 5.4 trillion won. Although the government's supplementary budget contribution is only 800 billion won, the plan is to leverage private capital and policy finance to provide more than six times that amount in actual liquidity.
Repurchase Condition Within One Year After Completion... "Encouraging Self-Rescue Efforts"
The government will supply liquidity by having the Housing and Urban Guarantee Corporation (HUG) purchase unsold apartments in provincial areas (excluding the Seoul metropolitan area) that are at least 50% complete, at 50% of the original sales price. Construction companies must repurchase these units within one year after completion. At that time, they must repay HUG not only the purchase amount but also additional costs such as taxes and interest. Jung Suho, MOLIT's Housing Fund Division Director, said, "This is the only program that supports projects before completion where unsold units remain after recruiting residents."
MOLIT plans to purchase a total of 10,000 units (3,000 to 4,000 units annually) over three years through this program. The total project cost is 2.4 trillion won, of which 300 billion won will come from the supplementary budget, with the remainder provided by HUG.
Construction companies, after securing funds, will resume sales and continue their self-rescue efforts. For example, if HUG purchases an unsold home with a sales price of 400 million won for 200 million won, the construction company can sell it on the market for 300 million won and use part of the profit to repurchase the unit. If the company fails to repurchase within the deadline, HUG will take ownership and dispose of it through a public auction.
Jung emphasized, "The core of this program is not simply the purchase itself, but to induce self-rescue efforts by construction companies. If a construction company fails to repurchase within one year after completion due to lack of effort, the unit becomes HUG's property and is disposed of through public auction, which naturally encourages construction companies to sell on the market to avoid losses." He added, "There is always criticism about why the public sector should bear the responsibility for oversupplying where there is no demand, but this program is relatively free from such criticism."
The government previously implemented this program from 2008 to 2013 to address liquidity problems caused by rising unsold inventories. A total of 19,000 units were purchased, and 99% were repurchased. At that time, purchases were also made at 50-60% of the sales price, and MOLIT explained that the program was highly effective in encouraging sales resumption.
According to MOLIT, the number of unsold units before completion in provincial areas surged from 6,000 in 2020 to 36,000 in 2024. During the same period, the total number of unsold units in provincial areas increased from 17,000 to 53,000, surpassing the level seen during the financial crisis. This is why the government set the purchase price uniformly at 50% of the sales price.
Jung explained, "Fifty percent is the minimum funding required for completion, and in effect, it is like HUG lending half of the construction cost using its credit. This leaves an incentive for construction companies to repurchase, while minimizing the government's risk of loss." In the past, the purchase ratio varied depending on the number of units (60% for 8 units or fewer, 50% for more than 8), but this time, the program will start with a uniform 50% rate. Adjustments may be made in the future depending on demand.
Breathing Room for High-Interest Bridge Loans... Government-Led 'Development Anchor REITs' Established
The government will also establish 'development anchor REITs' to support projects stalled due to funding shortages before full-scale PF loans. These REITs involve the government acting as an 'anchor (lead) investor' before a development project receives full PF loans, thereby attracting private capital. This is the first time the government is directly providing liquidity support at the bridge loan stage. The aim is to improve the structure where, at the initial stage of land acquisition for housing development projects, there is usually no asset collateral, forcing reliance on high-interest (10-20%) bridge loans.
By allocating 300 billion won from the supplementary budget, the government will create REITs totaling 1 trillion won, and preemptively invest a portion of land acquisition costs (10-20% of the total project cost) for high-quality development projects. Once project permits are secured, construction companies will obtain main PF loans and repay the REITs. The government's initial investment acts as a 'priming pump' to induce private capital inflow. Eligible projects are selected based on public interest (rental housing), economic impact, and stability. Since the government does not directly purchase housing but recovers its investment after investing, the fiscal burden is relatively low.
A MOLIT official said, "In reality, there are cases where private funds or so-called 'angel investors,' often referred to as black money, demand 100% profit in six months to provide funding. This leads to a vicious cycle of increased project costs, higher sales prices, and the burden being passed on to consumers."
MOLIT plans to select two to three asset management companies (AMCs) to operate these REITs through a public contest once the supplementary budget passes the National Assembly. However, actual fund execution is expected to take at least several months. MOLIT stated, "We will push forward as quickly as possible, aiming for execution within the year."
The government expects this program to indirectly support about 10% of the entire bridge loan market (10 trillion won annually as of 2024), and forecasts that it will reduce annual financial costs by more than 5 billion won compared to the current situation. A MOLIT official emphasized, "If land can be secured at low interest rates based on public guarantees instead of high interest rates, projects can quickly get on track."
Support will also be provided at the main PF stage. A special PF guarantee system for small and medium-sized construction companies will be introduced. The focus is on supporting construction companies outside the top 100, which raise funds through secondary financial institutions at the main PF stage.
While HUG's existing PF guarantees have focused on the top 100 construction companies by construction capacity, this new guarantee will provide separate coverage for small-scale projects. With financial institutions increasingly risk-averse and tightening lending, this is a policy response to help small and medium-sized construction companies secure liquidity. The guarantee size is expected to be about 2 trillion won, and the government plans to allocate 200 billion won from the general account to the housing fund to support HUG in preparation for guarantee losses.
Job Creation... Early SOC Project Starts and Expansion of Small-Scale Construction
Support for early commencement of SOC projects will also be provided to expand employment in the construction industry. An additional 712.4 billion won will be invested to accelerate the completion of ongoing projects such as the Honam high-speed railway and the Pyeongtaek-Osong double-track railway. In addition, 162.9 billion won has been allocated to strengthen SOC safety investments, including improvements to aging general railways and various structures.
Furthermore, 348.5 billion won will be invested in summer disaster prevention projects, such as maintenance of national rivers and repair of drainage pipelines for agricultural and fishing water facilities. Orders for small-scale public facility construction, such as renovations of national universities and military facilities, will also be expanded. As a measure to secure work for local small and medium-sized construction companies, 460.7 billion won worth of new projects will be launched.
Additionally, 51.1 billion won in extra support will be provided to public office buildings currently under construction that could be completed more quickly with additional funding. However, not all SOC and national/public facility construction budgets included in this supplementary budget fall under MOLIT's jurisdiction. Since the ordering entities differ by project, budget execution will also be divided among ministries.
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