#Mr. A purchased an apartment in Seoul for 4.25 billion won, adding 2.3 billion won borrowed from a financial institution for corporations' working capital to the price. The Ministry of Land, Infrastructure and Transport, while reviewing the funding details for high-priced apartment purchases, determined that Mr. A used the loan for an apartment purchase unrelated to the business and notified the financial authorities for misuse of a loan for a purpose other than intended.
From now on, when filling out a funding plan for purchasing dwellings, business loans must be listed separately. This is because, as cases like Mr. A's—where dwellings are purchased with funds raised through illegal or expedient means—have increased, the government decided to break down the items in the funding plan to strengthen verification of funds used to acquire dwellings. Accordingly, if the dwelling purchase funds are raised by selling virtual currencies, this must be recorded in the funding plan. If funds obtained through gifts or inheritances are included in the purchase money, whether taxes were filed must also be indicated.
According to the government on the 3rd, the Ministry of Land, Infrastructure and Transport (MOLIT) is pushing to improve the system to further break down the entries in the funding plan. With home prices surging and abnormal transactions that disrupt market order—such as expedient loans and gifts—expanding and stoking price pressures, the plan is to require more detailed entries in the funding plan.
A funding plan is a document that must be submitted to local governments indicating how the funds for acquiring real estate were raised when buying dwellings in a regulated area or when purchasing dwellings exceeding 600 million won even in nonregulated areas.
Funding plans are broadly divided into own funds and borrowing fund, and the Ministry of Land, Infrastructure and Transport (MOLIT) will require every source to be recorded in detail.
Currently, the funding plan allows entries for own funds to include only: ▲ financial institution deposits ▲ proceeds from stock and bond sales ▲ gifts and inheritances ▲ cash and other funds ▲ proceeds from real estate sales. However, going forward, in addition to proceeds from stock and bond sales, proceeds from virtual currency sales must also be listed. If funds were raised through gifts or inheritances, the amount and whether gift tax or inheritance tax was filed must also be stated.
For borrowing fund, after listing mortgage loan and unsecured loans, other loans could be entered as "other loans." However, from now on, business loans must also be listed separately.
In particular, the name of the financial institution from which funds were borrowed must also be entered. Previously, it was sufficient to indicate only the amount of each loan, but now the financial institution that executed the loan must also be listed.
An official at the Ministry of Land, Infrastructure and Transport (MOLIT) said, "There are quite a lot of cases where business loans are used to purchase dwellings rather than for operating corporations," adding, "If whether a business loan is involved is recorded in detail, it becomes easier to investigate potential violations." The official added, "If the name of the financial institution that executed the loan is listed, we can quickly identify where and how the loan was taken out, enabling us to monitor and manage it in cooperation with the financial authorities."
The Ministry of Land, Infrastructure and Transport (MOLIT) plans to complete revisions to the Enforcement Rule of the Act on Report on Real Estate Transactions by the end of the year. Once the revision is finished, the new funding plan will take effect immediately.
As the government closely examines whether funding plans for purchasing dwellings involve illegal or expedient practices, the market expects speculative demand outside of end users to diminish somewhat. A licensed real estate agent said, "Preparing the funding plan will likely become more difficult," adding, "If funding details become more complicated, won't the market contract in the short term? In particular, the higher the price of dwellings, the more difficult it may become to prove funding, so the impact could be significant."