Cloudy Credit Outlook for Construction Next Year... Full-Scale Debt Management [Real Estate AtoZ]

Negative Credit Outlook for 2026
Widening Gap Between Metropolitan and Regional Areas, Tighter Lending Regulations
Focus Shifts to Stability Over Expansion

Following this year, forecasts indicate that the construction industry will continue to struggle to escape from stagnation in the coming year as well. Tighter lending regulations are causing the pre-sale market to contract, which is expected to put pressure on construction companies' performance next year and negatively impact their credit outlook. Major construction firms are proactively working to improve their debt ratios or appointing financial experts as company leaders to strengthen risk management.

Cloudy Credit Outlook for the Construction Industry in 2026

According to the credit rating industry on December 27, Korea Ratings recently projected a "negative" credit outlook for the construction industry next year. The agency predicted that construction companies exposed to unsold inventory, increased working capital burdens, and safety risks would face additional downward pressure on their credit ratings.

NICE Investors Service and Korea Investors Service also released similar reports. NICE Investors Service forecasted a "decline" in the construction sector's performance for next year and set the credit rating outlook as "negative," while Korea Investors Service also projected a "negative" outlook. This year as well, credit rating agencies cited the possibility of decreased sales due to sluggish pre-sales or construction starts and maintained a "negative" view on credit ratings. Concerns were also raised about the potential materialization of contingent liabilities related to project financing (PF) risks.

It is expected that construction companies will face even greater funding challenges next year. The polarization of the real estate market between Seoul and regional areas is expected to intensify, potentially exacerbating the issue of unsold properties in regional markets. The "one smart home" phenomenon is widening the demand gap between the capital area and the provinces, increasing credit risks due to unsold units at regional sites and the recognition of impaired accounts receivable resulting from reduced recoverability. In addition, the government’s tightening of lending regulations, starting with the June 27 measures, has negatively impacted the pre-sale market and is also considered a negative factor.

Construction Firms Begin Reducing Debt... Subsidiary Sales Also Underway

With funding difficulties expected to intensify next year, major construction companies are moving to reduce their debt ratios to ease financial burdens. According to the Financial Supervisory Service’s electronic disclosure system, GS Engineering & Construction announced on December 17 that it had decided to issue 200 billion won worth of debt securities recognized as equity capital.

The purpose of the funding is for debt repayment, and the issuance of hybrid securities recognized as equity is seen as an effort to lower the debt ratio. As of the third quarter of this year, GS Engineering & Construction’s debt ratio stood at 239.89%, but this funding decision is expected to improve it to around 227%.

Earlier, in November, Lotte Engineering & Construction also decided to issue 350 billion won worth of debt securities recognized as equity capital. The purpose of the funding is also debt repayment, and the company’s debt ratio, which was 214.32% as of the third quarter, is expected to improve to the 170% range with the capital increase.

Some construction firms are working to secure financial soundness by selling off non-core subsidiaries. SK Ecoplant signed a stock purchase agreement (SPA) to sell 100% of its shares in three environmental subsidiaries-Renewus, Renewon, and Renew Energy Chungbuk-to the global private equity fund manager Kohlberg Kravis Roberts (KKR). The scale of the sale is approximately 1.78 trillion won. Through this equity sale, SK Ecoplant expects to improve its financial structure and strengthen its business portfolio focused on semiconductors. As of the end of September this year, its debt ratio was recorded at 218.62%.

There are also cases where companies are appointing financial experts as their leaders to prepare for liquidity risks. Hanwha Construction Division appointed Kim Wooseok, the head of finance at Hanwha Strategy Division, as its new CEO. He is known as a hands-on leader with over 30 years of experience in management and finance within the group.

An industry insider stated, "After the PF crisis in the past, there is a widespread perception that 'if the debt problem explodes, it could be fatal.' Rather than pushing ahead with risky projects, there is a growing focus on stability and financial soundness."