"Five-Year Loan Ban for Home Purchases Using Business Loans as a Loophole" (Comprehensive)

Intensive inspections of illegal and abnormal real estate transactions
Authorities to crack down on home purchases using business loans and parental assistance

The Financial Services Commission announced that on the 3rd, under the chairmanship of Secretary General Kwon Daeyoung, a joint 'Household Debt Inspection Meeting' with related agencies was held at the Government Seoul Office Building. Photo by Financial Services Commission.

The government will conduct a focused inspection of cases where individuals purchase homes using business loans or receive high-priced houses through so-called "parental assistance" as a means of circumvention. As the real estate market has overheated, the authorities have decided to crack down on home purchases made through such improper methods.

The Financial Services Commission announced that on July 3, under the chairmanship of Secretary General Kwon Daeyoung, a joint 'Household Debt Inspection Meeting' with related agencies was held at the Government Seoul Office Building. During the meeting, participants reviewed household loan trends for June, discussed the implementation status of the recently announced 'Strengthened Household Debt Management Plan,' examined trends at frontline branches, and deliberated on plans for intensive inspections of illegal, unlawful, and abnormal real estate transactions.

Participants noted that, due to the continued increase in housing transaction volume since February, the growth in household loans?centered on mortgage loans?has persisted through June. Considering the usual time lag of two to three months between home transactions and loan execution, they projected that the increase in household loans might continue into July.

The relevant agencies attending the meeting?including the Financial Services Commission, the Ministry of Land, Infrastructure and Transport, the National Tax Service, the Seoul Metropolitan Government, and the Financial Supervisory Service?agreed to further strengthen inter-agency cooperation and enhance their response to illegal, unlawful, and abnormal real estate transactions.

The Financial Supervisory Service will significantly strengthen inspections to ensure that business loans are not used for purposes other than intended (for example, using business loans to purchase homes). If illegal activities are detected, the relevant loan amount will be immediately recalled, and new loans will be prohibited for a specified period (one year for the first offense, five years for the second offense).

The National Tax Service will use funding plans and other documents to precisely analyze the sources of funds for high-priced homes and rigorously verify whether tax filings have been properly made. In particular, if it is confirmed that funds for acquisition were improperly given by parents or income was omitted, a strict tax investigation will be conducted.

The Ministry of Land, Infrastructure and Transport, in cooperation with the Seoul Metropolitan Government, other local governments, and the Korea Real Estate Board, will analyze funding plans and actual transaction data to focus inspections on improper gifts, suspicious sources of funds, false contract reports, and under-the-table or inflated contract practices. If any violations are confirmed, they will notify local governments and relevant agencies and request an investigation.

Secretary General Kwon emphasized, "The housing market has repeatedly experienced cycles of overheating and stagnation due to excessive borrowing beyond repayment capacity being used as leverage for home purchases. Now is the time to break this vicious cycle."

He added, "Financial authorities will firmly establish in the market the consistent principle of 'borrowing only as much as one can repay and repaying from the outset,' so that limited loan resources do not stimulate the housing market but instead flow into productive sectors such as the capital market and businesses, rather than speculative areas."

He also stated, "This measure focuses policy efforts on restricting additional home purchases by multiple homeowners and non-essential borrowing in the Seoul metropolitan area. I ask financial institutions, who best understand their customers and the field, to exercise particular care during the process of strengthening autonomous management measures, so that genuine homebuyers and vulnerable groups do not suffer any harm."