As the government's pressure on owners of multiple dwellings has intensified day after day, reconstruction projects have begun drawing up strategies for union members who own multiple dwellings. Owners of multiple dwellings currently cannot receive basic relocation loans from financial institutions. As a result, unions are arranging additional relocation loans to cover relocation expense. Unions secure project expense based on Sigongsa's credit lines and lend relocation expense to owners of multiple dwellings.
According to the maintenance industry on the 26th, the Eunma Apartments reconstruction union in Gangnam District, Seoul, will hold a briefing for union members in April on relocation loans. The union will first hold a briefing on Apr. 1 for members who own one dwelling, then on the 7th will provide a session explaining relocation loans for members who own multiple dwellings. A relocation loan is money borrowed to secure a jeonse home to stay in while a reconstruction project is underway or to return the jeonse deposit to a tenant.
With lending regulations on owners of multiple dwellings recently tightened further, the briefings on relocation loans are being split by the number of dwellings a member owns. Since the June 27 lending rules last year, owners of multiple dwellings cannot receive relocation loans. Because the basic relocation loan becomes 0 won, reconstruction business sites with many owners of multiple dwellings are facing difficulties at the relocation stage. If a union member who owns multiple dwellings fails to secure relocation expense, the project schedule—including relocation and groundbreaking—will be delayed one after another, and the project itself could be prolonged. A longer project period leads to higher expense. This year and next year in Seoul, 66 maintenance business sites, totaling 56,000 dwellings, are expected to see relocation affected by lending regulations.
Reconstruction unions are supporting owners of multiple dwellings with relocation expense through additional relocation loans. These loans are not funds extended by financial institutions to individuals; they are a type of project financing (PF) that unions secure as project expense through Sigongsa's credit lines. Because they are classified as PF funds, even owners of multiple dwellings who cannot obtain basic relocation loans face no restrictions in borrowing relocation expense. However, interest rates on additional relocation loans are higher than on basic relocation loans.
A maintenance industry official said, "The basic relocation loan can be up to 600 million won for those with one dwelling, but owners of multiple dwellings cannot get relocation loans," adding, "But if owners of multiple dwellings cannot borrow and do not relocate, the project will inevitably be delayed." The official added, "Through Sigongsa's credit lines, the union can secure and execute what is commonly called business facilitation expense, and use that to offer additional relocation loans to owners of multiple dwellings," noting, "This is clearly PF money, so the government cannot touch it, but given that the government is even considering recalling loans to owners of multiple dwellings, it will hardly welcome this."
Given this situation, business sites where so-called "top-tier construction companies" have joined are smoothly proceeding with additional relocation loans based on the construction company's strong creditworthiness. From the contractor selection stage, additional relocation loan terms are sometimes used as a key criterion. Last year, Samsung C&T won the contract with the Gaepo Useong 7th reconstruction union in Gangnam District, Seoul, by offering additional relocation loans with a loan-to-value (LTV) ratio of more than 100%. Recently, at reconstruction sites such as Apgujeong districts 3 and 5, where contractor selection is imminent, there have been a string of cases in which construction companies themselves sign memorandums of understanding (MOUs) with financial institutions to smoothly support project expense such as additional relocation loans.
However, when a small or midsize construction company is in charge, or when a reconstruction business site has weak profitability, Sigongsa's credit lines themselves are hard to obtain, making it difficult to arrange additional relocation loans. Some local governments, including the Seoul Metropolitan Government, are trying to speed up maintenance projects by providing relocation loan support through their own funds.
Another maintenance industry official said, "Because there is now a large gap in the loan limit between union members with one dwelling and those with multiple dwellings, the construction company's ability to raise funds for additional relocation loans is becoming more important," adding, "An increasing number of owners of multiple dwellings are checking whether there are financing or fundraising methods the union can connect them with."