The Financial Services Commission held a meeting with related government ministries, policy financial institutions and financial industry representatives on October 5 to check the implementation plan of the financial measures announced earlier on September 26 that are intended to boost housing supply. At the meeting, the authorities discussed (a) ways to expand the supply of project finance (PF) lending support by policy financial institutions, (b) the current situation in preparing the real estate PF market normalization fund and (c) establishing an oversight and management system to enhance the effectiveness of the measures.
Expanding policy financial institutions’ supply of PF lending support
The Korea Housing Finance Corporation (HF) and the Korea Housing & Urban Guarantee Corporation (HUG) have each raised the size of PF guarantees available by KRW5 trillion for a total of KRW10 trillion in additional guarantee capacity. The policy financial institutions (Korea Development Bank, Industrial Bank of Korea and Korea Credit Guarantee Fund) will begin to supply KRW7.2 trillion or more from this month to ensure stability of real estate development projects and construction firms. In addition, Construction Guarantee (CG) is currently preparing to make available KRW6 trillion worth of guarantee support programs intended to help construction companies engaged in non-housing (non-apartment) development projects. Until the end of this year, the five major financial holding companies will continue to make available about KRW4 trillion in lending supports for the real estate development projects currently operating.
Real estate PF market normalization fund
At the meeting, the authorities went over the current situation in creating a real estate PF market normalization fund in the size of KRW2.2 trillion, which is intended to supply funds necessary for normalizing and restructuring of illiquid or at-risk projects. First, a matching fund raised by the Korea Asset Management Corporation (KAMCO) and private sector investors has been created in the size of KRW1.1 trillion. Second, a separate fund in the size of up to KRW1.1 trillion will be raised, aside from the KAMCO-raised fund, with contributions from financial holding companies, credit finance businesses and savings banks. The credit finance industry already announced a plan to raise up to KRW400 billion. Savings Banks have already set up a fund worth KRW33 billion in September and plan to increase the size to up to KRW100 billion by the end of this year. The financial holding companies (Hana, NH and Woori financial holding companies) are expected to supply about KRW450 billion worth of new money. Along with the United Asset Management Company (UAMCO), Industrial Bank of Korea (IBK) will set up a fund worth about KRW150 billion to support non-housing real estate development projects and related SMEs. The authorities expect that the real estate PF market normalization fund will facilitate restructuring of real estate development projects, and this will also help to bring in new money from the private sector through investments in the NPL (non-performing loan) market.
Financial support oversight and management system
The Financial Supervisory Service (FSS) will operate an oversight and management system to ensure that the financial support measures intended to boost housing supply can actually work toward that end. The authorities will seek to improve the factors that stand in the way of supplying new money to real estate development projects. While establishing a monthly analysis and management system to effectively check and improve the situation of money supply for individual projects, the authorities will continuously monitor the issuance of new loans and any change in the status of lending institutions.
* Please refer to the attached file for details.