At a real estate finance policy forum hosted by the Financial Services Commission, experts were divided over easing regulations on relocation loans for reconstruction and redevelopment. Advocates said the loan curbs should be relaxed to expand the supply of dwellings, while opponents argued it would be inappropriate to grant preferential treatment to specific regions or groups.
On the 15th at the Bankers Hall in Jung District, Seoul, experts held a debate for and against the issue of relocation loans at the "Public hearing on real estate finance policy." Currently, relocation loans for refurbishment projects apply a loan-to-value (LTV) ratio of 40%. Builders and the refurbishment industry have argued that restrictions on relocation loans delay project execution and have called for easing the rules.
Lee Da-yeol, head of policy at the Korea Housing Builders Association, noted that due to relocation loan regulations, it has become difficult to achieve the purpose of refurbishment projects to supply a pleasant residential environment. Lee said, "The financial burden on association members is increasing, and in particular, multi-home owners cannot obtain relocation loans, which creates significant difficulties for supplying dwellings through refurbishment projects," adding, "The relocation burden is reflected in the association members' contributions, and those contributions are then reflected in the general pre-sale price. In the end, pre-sale prices have no choice but to rise."
Kim Won-jang, a reporter at SamproTV, also said, "Curbing loans is to stabilize real estate prices and to rein in speculative demand," adding, "Redevelopment and reconstruction projects involve lending money when business approvals and management and disposition plan authorizations are granted and when construction starts. I don't understand what kind of speculative demand can be curbed by restricting relocation loans."
On the other hand, some said easing relocation loan regulations could benefit certain groups and also run counter to the financial authorities' policy goal of a 'decoupling of real estate and finance.'
Choi Eun-young, director of the Korea Urban Research Institute, said, "It's not that relocation loans are not provided to redevelopment and reconstruction association members now; loans are available up to 600 million won, and the demand is to do more," adding, "The government announced the decoupling of real estate and finance on Apr. 1. Is this a claim weighty enough to break that principle?" She continued, "Benefits are concentrating in high-priced areas of Seoul, and I think the very act of focusing discussions there is a problem." She added, "If you go to redevelopment and reconstruction sites, only 20% to 30% of association members even live there," and said, "Worrying about the relocation of these people is highly inappropriate."
Bae Moon-sung, an analyst at Life Asset Management, also said, "I've heard that behind the calls to ease relocation loan regulations is an aim to cover sharply increased additional contributions with relocation loans compared with the past," adding, "If relocation loans are further supported for builders' revenue, it feels off from the original intent of securing temporary housing." He said, "Even if it is strategically eased later, I don't think there is any need to relax the relocation loan limits for the time being."
During the open discussion that followed the panel session, questions also arose about relocation loans. Baek Doo-jin, Head of Team for real estate finance analysis at the Seoul Metropolitan Government, countered the criticism that relocation loans are a perk for certain groups by arguing that residents in small-scale areas with weaker business viability are actually being harmed. Baek said, "We surveyed all areas ahead of relocation and found that relocation is clearly not proceeding smoothly due to relocation loan issues," adding, "I've never heard calls from Gangnam or other areas with high-priced dwellings to lift relocation loan regulations. That's because large builders are covering all additional relocation costs." Baek continued, "Builders cannot invest in small areas with weak business viability. Due to relocation loan issues, association members' relocation is being delayed."