The government will spend a total of 2.7 trillion won to revitalize the frozen construction market by purchasing 10,000 unsold dwellings and accelerating national and public facilities and social overhead capital (SOC) construction. The strategy is to revive the stagnated local construction market through the early execution of key SOC projects such as railways and rivers.
On the 19th, the government announced that it had reviewed and approved the supplementary budget plan for the second additional revised budget of 2025 during a Cabinet meeting.
To address the liquidity crisis in real estate project financing (PF), the government included 800 billion won in this supplementary budget. Of this, 300 billion won is allocated to the 'water management REITs' project, 200 billion won to establish a dedicated PF guarantee for small construction companies, and 300 billion won for the unsold dwellings guaranteed buyback system. The 'water management REITs' project involves public investment in prime business sites to supply initial PF funds.
The dedicated PF guarantee for small construction companies reflects 200 billion won from the housing fund. According to the Ministry of Land, Infrastructure and Transport, a new guarantee system has been designed to cover up to 70% of total project costs for business sites participating in second-tier financial institutions and small construction firms ranked outside the top 100 in construction competency. The assessment criteria have been adjusted to increase the focus on project feasibility while reducing the evaluation of the construction firms.
The unsold dwellings guaranteed buyback system will receive 300 billion won through the supplementary budget. In this system, the Housing and Urban Guarantee Corporation (HUG) purchases unsold dwellings before completion at 50% of the selling price, and after completion, the construction firm will buy back at the purchase price plus interest.
A representative from the Ministry of Land, Infrastructure and Transport said, 'This buyback system is not about HUG taking on unsold units but is focused on supplying liquidity to construction firms and inducing self-help efforts.' They added, 'This encourages responsible buybacks and sales efforts from construction firms only for marketable business sites, thereby minimizing moral hazard.'
He continued, 'This system is an evolved form of the buyback program implemented during the financial crises of 2008 and 2010, which received positive evaluations in the market at that time, and is designed to distribute risks among construction firms, the government, and HUG.'
This supplementary budget also includes 1.4 trillion won for SOC projects that can be executed within this year. A total of 712.4 billion won will be invested to expedite the completion of the Pyeongtaek-Osong double track and Honam High-Speed Rail National Network projects. Additionally, 162.9 billion won is allocated for the repair of aging railway structures, while 348.5 billion won is designated for the maintenance of national rivers and rural irrigation facilities and drainage systems. This is a measure to respond proactively to summer typhoons and heavy rainfall.
The issuance of small-scale public works contracts that provide direct job opportunities to local construction firms will also be significantly expanded. A total of 460.7 billion won will be invested in small-scale projects such as national universities, military facilities, and public building repairs, with 51.1 billion won allocated separately to ensure completion by the end of the year for sites where progress has been made. A government representative explained, 'This is an investment to ensure that small local construction firms can secure new contracts and money flows into the economy.'
At the same time as this supplementary budget, the government designated some SOC projects for expenditure restructuring. Vice Minister of Economy and Finance Lim Gi-geun stated, 'Projects that cannot be fully executed this year will be subject to expenditure restructuring,' and added, 'We have thoroughly checked SOC projects according to practical principles and reduced budgets that cannot be utilized.'
The Gadeokdo new airport project was also included in the list of items subject to some cuts. Vice Minister Lim stated, 'Sections delayed due to the cancellation of contracts will be subject to restructuring, but projects that continue, such as access roads, will proceed as originally budgeted.'