Three CR REITs Apply for Business Registration with the Ministry of Land
Purchases Expand to Yangsan and Gyeongju... Total Units Increase to 1,981
Corporate restructuring real estate investment trusts (CR REITs), which purchase unsold housing units in provincial areas, will acquire an additional 1,400 unsold apartment units in Daegu, Yangsan, and Gyeongju. As a result, the total number of units that CR REITs have purchased or are in the process of acquiring has increased to approximately 2,000.
According to the Ministry of Land, Infrastructure and Transport on June 23, three CR REITs applied for new business registrations by the end of last month. These REITs plan to acquire 163 units in Gyeongju, North Gyeongsang Province; 265 units in Yangsan, South Gyeongsang Province; and 990 units in Dalseo District, Daegu, respectively.
Among these, the Daegu apartments have remained vacant for over a year since their completion at the end of April last year. Even though additional options such as free balcony extensions were offered, the units failed to sell, and ultimately, the CR REIT decided to purchase all 990 units in bulk. Daegu has the highest number of unsold units after completion nationwide. As of the end of April, there were 3,776 such units in Daegu, accounting for 17% of the nationwide total of 21,897 unsold units classified as problematic.
CR REITs operate by pooling funds from multiple investors to purchase unsold apartments, renting them out, and then selling them again when market conditions improve.
The government is supporting the activation of these CR REITs through tax and financial incentives. If a CR REIT acquires unsold provincial apartments by the end of this year, acquisition tax will not be levied at a higher rate, and comprehensive real estate tax will be exempted for five years. In addition, the Korea Housing and Urban Guarantee Corporation (HUG) provides loan guarantees for up to 70% of the appraised value, allowing CR REITs to borrow funds at lower interest rates.
Previously, the first CR REIT acquired 288 units at Suseong Lake Woobang IU Shell in Suseong District, Daegu, and the second REIT, which plans to purchase 275 units in Gwangyang, South Jeolla Province, will soon complete its registration process. To date, the total number of units that CR REITs have acquired or applied to acquire stands at 1,981.
The government has operated CR REITs twice in the past as well. Immediately after the 2009 financial crisis, 2,100 units were purchased, and in 2014, 500 units were acquired. Recently, in addition to CR REITs, the government has been addressing the issue of unsold provincial apartments through direct purchases by Korea Land and Housing Corporation (LH) and "repurchase conditional purchases." Under the repurchase conditional purchase scheme, the government initially buys 10,000 unsold apartments before completion, and the construction company later buys them back. This year, a supplementary budget of 300 billion won has been allocated to this project.
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
