Lee Orders Review of Tighter Rules on Loan Rollovers and Refinancing for Multi-Homeowners
Proposals Include RTI Tightening and Blocking Loan Maturity Extensions
“Approach Based on the Principle That There Should Be No Exceptions for Multi-Homeowners”
As President Lee Jaemyung has called for strong regulatory measures on loans to multi-homeowners, including registered rental business operators, attention is focusing on what specific measures will be introduced.
Previously, when news emerged that the financial authorities were reviewing a plan to tighten the Rent to Interest (RTI) ratio, which is used as a regulatory tool for loans to rental business operators, President Lee pointed out that this alone would be insufficient. Measures being discussed include completely blocking maturity extensions on such loans, or inducing repayment of principal and interest over a set period.
On the 20th, President Lee wrote on X (formerly Twitter), "I have instructed the Cabinet and the Presidential Secretariat to review the current status of loan rollovers and refinancing for existing multi-homeowners, along with robust regulatory measures on these practices."
President Lee has consistently expressed his intention to strengthen tax and loan regulations on multi-homeowners. He has now moved to target rental business operators as well. On the 13th, he said, "What should we do with existing loans held by multi-homeowners when they reach maturity?" and added, "For years we have given them opportunities, even cutting capital gains tax, yet they have held on without reducing their multiple-home ownership. Would it be fair to grant only them additional benefits in the form of loan extensions?"
While mortgage loans taken out by individuals typically have maturities of 30 to 40 years, loans to rental business operators are treated as corporate loans and are usually granted with maturities of 3 to 5 years. After that, they are structured to be renewed annually. Because the review process for extending loans at maturity has been criticized as lax, there were expectations that the authorities would apply the RTI ratio more strictly in this review process. The RTI is an index that divides a rental business operator's annual rental income by annual interest expenses, and is used to determine whether interest can be sufficiently covered by rental income. Currently, an RTI of 1.5 times is required in regulated areas, and 1.25 times in non-regulated areas.
However, as President Lee wrote on the same day, "Why are you only reviewing RTI regulations? Loan rollovers or refinancing conducted after the loan term expires are, in essence, no different from new loans," the market expects that measures may be introduced to regulate loan extensions themselves. There are also projections that extensions of loans to rental business operators could be blocked, or that refinancing itself could be fundamentally prohibited.
If such measures are implemented, rental business operators would have to repay their loans at maturity and then either take out new loans or secure funding on their own. If treated as new loans, screening standards could be tightened or limits reduced. To prevent market turmoil, there are also expectations that the government will present measures to induce borrowers to repay by making them amortize principal and interest over time, rather than repaying the principal in a lump sum at maturity. President Lee has cited gradual approaches such as "50% in one year, 100% in two years" as examples.
If they lack sufficient capacity, they will have to sell real estate to repay. Considering that most of the housing held by rental business operators consists of non-apartment properties such as villas and officetels, where demand is relatively weak, their repayment capacity could be constrained, potentially leading to many properties being put up for auction. According to the Ministry of Land, Infrastructure and Transport, as of 2024, apartments account for 15.7% of the 278,886 long-term purchase-type rental housing units in Seoul. The remaining 84.3% consists of villas, multi-family homes, officetels, and similar properties.
For the four major commercial banks, the outstanding balance of loans to residential rental business operators is estimated at around 15 trillion won. Of this, loans reaching maturity this year are reported to be in the range of 11 to 12 trillion won, or about 80%. When including secondary financial institutions, the industry expects that loans to rental business operators for which rollover decisions must be made within this year will total at least 15 to 20 trillion won.
Yoon Sumin, Real Estate Specialist at NH Nonghyup Bank, said, "The President's intention appears to be to tell rental business operators, in addition to existing multi-homeowners, not to hold multiple homes financed by loans, but to sell them," adding, "He is approaching this issue with the view that there should be no exceptions for multi-homeowners." Kim Hyosun, Chief Real Estate Specialist at KB Kookmin Bank, said, "Because many have long relied on leveraged investments using loans, there is a high possibility that they do not have sufficient cash for repayment," and added, "Although the government is still reviewing the measures, they could have a significant impact on the asset market, so multi-homeowners need to proceed with caution."
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