The Ministry of Land, Infrastructure and Transport said on the 29th that, as a follow-up to the "Sept. 7 plan to expand dwelling supply," it has completed all institutional improvements such as easing guarantee requirements and limits related to dwelling construction by the Korea Housing & Urban Guarantee Corporation (HUG) to strengthen funding support for dwelling developers, and will begin supplying about 100 trillion won in public guarantees annually going forward.
The Ministry of Land, Infrastructure and Transport (MOLIT) will ease funding difficulties for dwelling developers stemming from the freeze in the project financing (PF) market by extending for one year special measures easing guarantee requirements, including raising the PF loan guarantee limit from 50% to 70% of total project cost and abolishing restrictions based on the builder's construction ranking.
In addition, for business sites that are struggling to finance construction costs through presale payments due to sluggish presale rates and rising construction costs, PF loan guarantees will provide additional support for construction costs (up to 70% of total project cost), and the scope of bridge loans (including unpaid interest) that can be refinanced with PF loan guarantees will be greatly expanded from "principal + two years of interest" to "principal + five years of interest" to help reduce dwelling developers' financing costs.
Initial costs for redevelopment and reconstruction projects have been financed through builders' lending, but considering changing market conditions, including the recent increase in cases using high-interest bridge loans from financial institutions, the main project cost loan guarantees for such projects will also be improved.
The scope of initial costs eligible for refinancing with main project cost loan guarantees will be expanded beyond the current items of "builder lending," "trust company lending," and "financial institution PF loans" to include "bridge loans from financial institutions."
By expanding the range of initial costs that can be refinanced "before groundbreaking" through main project cost loan guarantees, the high-interest burden at the early stage of projects will be reduced as much as possible.
Meanwhile, the limit of the urban dwelling special guarantee, which supports low-interest loans from first-tier financial institutions for developers of newly built purchase-for-lease dwellings, will also be raised.
With improved funding conditions for developers, it is expected that 70,000 newly built purchase-for-lease dwellings will be supplied quickly over the next two years.
An official at the Ministry of Land, Infrastructure and Transport (MOLIT) said, "As the public sector's priming role is important to improve conditions for private dwelling supply, we have significantly improved the requirements and limits of HUG's public guarantees," adding, "In particular, through this, we expect to support funding for up to 476,000 units in redevelopment and reconstruction projects, greatly expanding the supply of dwellings in urban areas."