Korea Land & Housing Corporation (LH) will support up to 80% of initial land costs in the new-build purchase agreement program to increase the supply of public rental dwellings. After construction begins, construction costs will be paid every three months based on the construction progress rate. Korea Housing & Urban Guarantee Corporation (HUG) will also launch a guarantee product that allows borrowers to obtain low-interest loans for land costs for the project.
LH on the 20th announced improvements to the funding support system and procedures for the new-build purchase agreement program. The new-build purchase agreement program is a system in which LH promises in advance to purchase dwellings that a private developer plans to build or is building before completion, then buys them upon completion to use as public rental dwellings.
The improvements include expansion of land acquisition support funds ◇ payment of construction costs according to progress rate ▲ establishment of a new HUG initial project cost guarantee ▲ introduction of a fast-track groundbreaking plan.
First, support for land costs, long cited as the biggest burden at the start of a project, will be greatly expanded. For general management-type land trust projects in the greater Seoul area, if early agreement conditions are met, the land acquisition support fund will be improved so that up to 80% of the previous 70% level of land costs can be received. As a rule, the land acquisition support fund pays 60% of the land cost, but if early completion of drawing consultations and early agreement conditions are satisfied, an additional 20 percentage points (p) will be provided to support up to 80% of the land cost.
For non-capital regions, where there had been no incentives, an early agreement incentive will be introduced for the first time. In addition, for developers that meet early agreement conditions above a certain level, the penalty for canceling the agreement will be waived to reduce early project risk.
The system for paying construction costs after groundbreaking will also change. Currently, the purchase price is paid in three installments: after completion of the structural frame, after completion, and after the final quality inspection. Going forward, payments will be made every three months based on the construction progress rate. LH said this will reduce the burden on developers to front construction costs for an extended period and is expected to cut financing costs such as PF loan interest. The progress rate will be verified through the supervisor's confirmation and other means, and payments will be made based on actual construction performance to ensure fairness and transparency.
In addition, quality inspection results will be linked to payments, and mechanisms to secure claims, such as establishing a priority right to the trust property, will be strengthened to minimize risks associated with advance payment of construction costs.
Separate support will also be provided for funds that were lacking at the start of projects to enable smooth groundbreaking. To support initial project expenses such as land balance payments, design, and permitting expenses that arise after the land contract, Korea Housing & Urban Guarantee Corporation (HUG) will introduce a new guarantee product that enables low-interest loans of up to 30% of land costs.
To expand supply, standards for the number of units to be purchased will also be relaxed. Until now, partial purchases were not allowed, but going forward, partial purchases will be permitted within less than 50% of total units if the number meets or exceeds the region-specific minimum purchase requirement. For the minimum number of units, which had been set separately by region, at least 10 units will apply to regulated areas in the greater Seoul area.
For projects that agreed to the existing construction cost-linked method, a fast-track groundbreaking plan will be introduced to move up the groundbreaking schedule by up to five months. In consideration of the long time required to verify construction costs, groundbreaking will be permitted before verification, and if construction costs are calculated and an amended agreement is signed within six months after groundbreaking, incentives will be provided. The incentives are to pay 5% of the planned purchase amount up front and to raise the purchase agreement payment from 60% to 65%.
These system improvements will be applied retroactively not only to submissions under the 2026 purchase announcement but also to submissions already received, rather than only to those received under the revised purchase announcement. Starting with the integrated headquarters purchase announcement on the 20th, regional purchase announcements reflecting detailed regional purchase conditions will be posted in sequence. Details can be found in the purchase announcement posted on LH Subscription Plus.