The government will create a 600 billion won "Future City Fund" to ensure stable financing for renewal projects in aging planned cities, including the first-phase new towns such as Bundang, Ilsan, Pyeongchon, Sanbon and Jung-dong. It plans to speed up the renewal projects through low-interest loan support to expand the supply of dwellings in aging planned cities.
The Ministry of Land, Infrastructure and Transport said on the 7th that it will create the first Future City Fund at 600 billion won to stably finance costs for renewal projects in aging planned cities and begin providing loans for initial project costs.
The Future City Fund is a policy fund that lowers the financing burden of renewal projects in aging planned cities to help push projects forward faster.
Based on guarantees from the Korea Housing & Urban Guarantee Corporation (HUG), this fund helps project implementers for aging planned city renewals secure project financing at low interest rates. HUG-guaranteed loans carry interest rates about 1.4 times lower than contractors' self-financing. As of last month, if a contractor with a credit rating of A- self-finances, the rate is 5.3%, while an HUG-guaranteed loan is just 3.7%.
A project implementer that has completed the selection of a contractor can borrow up to 20 billion won for initial project costs. Later, the main project costs can also be borrowed up to 60% of total project costs.
The Ministry of Land, Infrastructure and Transport (MOLIT) will give advance notice this month of subordinate regulation amendments to the Aging Planned City Renewal Act to streamline procedures for renewal projects in aging planned cities. The amendments specify matters delegated by the revised Aging Planned City Renewal Act set to take effect on Aug. 4 and include expanding measures such as designating preliminary project implementers, which had been piloted in leading districts. MOLIT aims to promulgate the amendments in August after regulatory and legal reviews and deliberations by the Vice Minister and the Cabinet by July.
Through these measures, renewal projects in aging planned cities, including the first-phase new towns, are expected to gain speed. In the first-phase new towns, eight leading districts have completed designation as special renewal zones and are working on selecting project implementers and contractors. Local governments are accepting resident proposals for follow-up projects.
Of the eight leading districts, two in Sanbon, Gunpo have designated the Korea Land & Housing Corporation (LH) as project implementer, and in Anyang's planned special renewal zones, six zones (14,102 households) have applied for pre-consultation on special renewal plans, indicating that follow-up projects are proceeding smoothly this year.
Kim Young-guk, head of the Dwelling Supply Promotion Headquarters at the Ministry of Land, Infrastructure and Transport (MOLIT), said, "By creating this Future City Fund, we expect to help ease the burden of raising large-scale funds for the renewal of aging planned cities and speed up the projects," and added, "Through institutional improvements that accelerate project timelines and close cooperation with local governments, we will implement the Sept. 7 measures without a hitch and swiftly deliver supply outcomes that people can feel."