During the first quarter of this year, the exposure amount for real estate project financing (PF) decreased by approximately 11.5 trillion won. Financial authorities have decided to extend the relaxation of regulations on real estate PF in the financial sector, which was scheduled to end in the first half of this year, until the end of the year. It is determined that more financial support is needed for non-capital area business sites.
On the 1st, the Financial Services Commission held a meeting to monitor the real estate PF situation and announced this information. According to the FSC, the total exposure of real estate PF as of the end of March was 190.8 trillion won, down 11.5 trillion won compared to the end of last year. The balance of loans classified as problematic business sites, including significant (C) and high-risk (D) loans, is 21.9 trillion won, accounting for 11.5% of the total exposure. The FSC noted that about half of the problematic business sites, amounting to 12.6 trillion won, would be resolved and restructured by the end of the first half of the year.
While exposure decreases, the arrears rate is on the rise. Although the overall scale of real estate PF business has shrunk, the presence of unresolved problematic business sites has negatively impacted the arrears rate. As of the end of March, the arrears rate for real estate PF loans in the financial sector was 4.49%, an increase of 1.07 percentage points compared to the previous quarter and up 0.85% from the same period last year.
The FSC has decided to extend the temporary relaxation of real estate PF regulations, which applied broadly to the second financial sector, until the end of the year. Consequently, 10 measures for relaxation, including separate classification for soundness when handling new real estate PF, will continue until the end of the year. It has been determined that funding related to non-capital area business sites, which are primarily handled by the second financial sector, is necessary.
Additionally, the FSC plans to determine detailed guidelines related to the improvement of the real estate PF system within the year. This improvement plan will include the differential application of risk weights for real estate PF loans by sector and the application of capital requirements regulation to mutual finance and credit specialized finance.