To spur housing supply, the financial authorities will double public guarantees for real estate project financing (PF) business sites starting next year. The PF equity ratio regulation that was to take effect next year will be deferred for two years.
Lee Eog-weon, chair of the Financial Services Commission, said this at a joint real estate policy briefing by the Financial Services Commission, the Ministry of Land, Infrastructure and Transport, the Office for Government Policy Coordination, and the Ministry of Economy and Finance held at Government Complex Seoul on the 13th. The PF guarantee supply target of the Korea Housing Finance Corporation (HF) and the Korea Housing & Urban Guarantee Corporation (HUG) will increase from 1.69 trillion won this year to 2.3 trillion won, and expand to 3.3 trillion won next year. The plan is to concentrate guarantee supply next year, when the number of units slated to start construction is the smallest. The construction starts are expected to fall from 268,000 homes this year to 249,000 next year.
Support for PF guarantee fees will also be expanded. The 30% cut in guarantee fees that was initially set to apply through April next year will be extended through the end of next year. As a result, HF's average guarantee fee will drop to 0.17% from 0.25% before the cut. Considering that it typically takes three to six months from guarantee approval to groundbreaking, business sites that break ground within three months after approval will receive an additional 10% fee reduction. HF's guarantee coverage ratio for residential business sites will also be temporarily expanded from the current 90%–95% to 100% through the end of next year.
The guarantee system for business sites mixing high-priced dwellings and quasi-dwellings will also be improved. Even common project costs such as land expenses for high-priced dwellings over 1.2 billion won within the same complex, which are currently excluded from HF guarantees, will be included in the guarantee scope. The aim is to smooth the transition to senior PF by fixing the problem of reduced guarantee limits solely because high-priced dwellings are included.
Guarantee requirements related to quasi-dwellings will also be eased. Previously, dwellings had to account for at least 70% of the entire business site, but going forward, a guarantee will be available if dwellings and quasi-dwellings combined account for 70% or more. Quasi-dwellings include residential officetels or dormitories and other non-dwelling structures that can be used as residential facilities.
Financial support for redevelopment and reconstruction projects will also be strengthened. First, a new guarantee product will be created for loans to such projects, focusing on small and mid-sized builders. A plan is also being pursued to cut guarantee fees by 0.1 percentage point for business sites involving small and mid-sized builders, such as those ranked within the top 50 in construction capability assessments.
Financial regulations to promote housing supply will also be eased. The financial authorities, considering sector soundness, decided to temporarily defer for two years the PF equity ratio regulation, limited to residential business sites. It was originally set to take effect in 2027, but the start will be pushed to 2029. The existing plan called for gradually raising PF operators' equity ratios from 5% in 2027 to 20% in 2030. Specific measures will be released within the year after consultations with sectors and associations.
Funding to normalize distressed PF business sites will also increase. The Korea Asset Management Corporation (KAMCO) PF normalization support fund will be newly formed at over 3 trillion won. Depending on demand, an additional expansion in the second year is under review. The government will inject a total budget of 1.5 trillion won over three years, 500 billion won each year, and add 1.5 trillion won in private capital to establish a total of 3 trillion won. At least 60% of the KAMCO PF normalization support fund will be invested in residential business sites.
PF syndicated loans created by the banking and insurance sectors themselves will be expanded from the current 1 trillion won to 5 trillion won. When the KAMCO fund invests as a subordinated tranche, the risk weight on funds injected by the banking and insurance sectors will be lowered from 400% to 100% to encourage active execution by financial companies. The financial authorities expect that expanding and investing syndicated loans to 5 trillion won will generate a supply effect of at least 20,000 dwellings.
Sectoral PF normalization funds raised by financial industries themselves will also be added. The current 7.3 trillion won in self-help normalization funds will be expanded to 10 trillion won. Including a plan for the securities industry to add 2.1 trillion won, the specific additional amount will be decided after sector-by-sector demand surveys.