"Revitalizing Real Estate PF Is Key to Expanding Housing Supply" - Solutions Sought at National Assembly

Real Estate PF Policy Seminar Held on the 16th
Attended by Stakeholders from Construction Companies, Banks, and Government

A policy seminar was held to discuss measures to revitalize real estate project financing (PF), which is considered a key factor in expanding housing supply.

On the 16th, at the National Assembly Members' Office Building, Junsang Kim, Senior Team Leader of the Screening Department at Suhyup Bank, is presenting on "The Bank's Role in Normalizing Real Estate Project Financing (PF) Loans and Revitalizing Housing Supply." Photo by Seong Ah Sim

On the afternoon of the 16th, Assemblyman Ando Geol of the Democratic Party of Korea and the Architectural Institute of Korea held a policy seminar at the 3rd Seminar Room of the National Assembly Members’ Office Building under the theme, "Measures to Revitalize Real Estate PF for Expanding Housing Supply."

Stakeholders from various sectors, including construction companies, banks, and the government, came together to share their challenges from their respective perspectives and discuss ways to promote PF.

For the first presentation, Lee Hyung-rok, Head of the Private Business Team at DL Construction, noted, "The excessive equity ratio requirements and the guarantee of high returns, reaching up to 20% per annum, imposed by the financial sector contribute to raising the unit cost of housing supply." He added, "Project returns must be at least 40%, but in reality, it is difficult to find such projects."

He went on, "Loan regulations targeting multiple homeowners have resulted in a continued backlog of unsold homes in non-metropolitan areas, which freezes the cash flow of small and mid-sized construction companies and heightens the risk of default." He emphasized that "Risks need to be predicted and distributed fairly. A stable structure that both building contractors and financial institutions can pass credit screenings is essential for housing supply."

Kim Junsang, Senior Team Leader of the Loan Review Department at Suhyup Bank, shared the difficulties banks face in granting PF loans. Kim explained, "Although PF loans are high-yield loans in terms of nominal interest rates, a risk-weighted asset (RWA) ratio of 150% applies, making the actual profitability lower than that of typical corporate loans." He pointed out, "The structural limitations of the Korean-style PF and the reality that approval or rejection depends on the contractor's creditworthiness are significant risks in lending decisions."

He suggested that "standardizing the responsibility for project completion system and expanding public guarantees to non-metropolitan areas are necessary." As roles for banks, he proposed: ▲ creating non-metropolitan area-exclusive syndicated loan tranches, ▲ adopting project feasibility-based reviews rather than relying solely on collateral or guarantees, ▲ actively utilizing prudential incentives, and ▲ equity and structured finance.

Kim further stated, "Banks taking the lead in PF normalization will be the starting point for sustainable housing supply." He recommended enhancing the credit review system, expanding policy finance connections, and strengthening cooperation between banks and the government.

Kim Sung-woo, Team Leader at the Housing and Urban Finance Research Institute under the Korea Housing and Urban Guarantee Corporation (HUG), said, "It is necessary to manage PF project sites to prevent defaults and their spread due to rising interest rates." He emphasized, "Integrated project management is required through feasibility analysis, monitoring of real estate PF, and post-management."

This content was produced with the assistance of AI translation services.