Accelerating Officetel and Urban Housing Supply... Land Cost Support Raised to 80%

Non-Apartment Housing Supply Measures Take Effect Today

HUG to Revise Urban Housing Special Guarantee

Retroactive Application to All Projects Submitted This Year

Partial Purchases Permitted, Not Limited to Entire Buildings

"Start Construction First, Verify Costs After" System Implemented

Project developers supplying new-build, non-apartment rental housing this year will be eligible for up to 80% in government land acquisition support. The government measures announced in May will go into effect on July 20, and retroactively apply to projects submitted earlier this year. In addition, the Housing and Urban Guarantee Corporation (HUG) plans to revise its urban housing special guarantee system so that it can lend for initial project costs such as the remaining land costs and design fees, up to 30% of the land cost.

The Ministry of Land, Infrastructure and Transport, Korea Land & Housing Corporation (LH), and HUG announced that from today, they are implementing supplementary measures unveiled in May to accelerate the supply of non-apartment housing types, such as officetels and urban lifestyle housing. These measures include reducing the initial financial burden on developers and relaxing purchasing standards.

A view of a villa-dense area in Eunpyeong-gu, Seoul. Photo by Yonhap News Agency

Previously, new-build rental purchase agreements provided support for up to 70% of land costs prior to land acquisition or commencement of construction. However, under the new measures, this support is increased to 80%. Projects that complete design coordination early or meet early contract conditions are eligible. HUG will guarantee 10% of the land cost, and also provide guarantees for initial project costs within a 20% limit.

Support will also be provided for initial project funding prior to construction. HUG is revising the operation of the urban housing special guarantee, allowing loans for initial costs up to 30% of the land price. This special guarantee enables developers, who have entered into purchase agreements with a buying institution, to obtain construction financing at low interest from financial institutions with a HUG guarantee. Although previously, loans with a guarantee for up to 90% of total construction costs could be secured, the limitation was that design and approval costs before commencement had to be self-financed by the developer.

It will also become easier to secure funds after construction has started. Originally, 60% (cumulative) of the total purchase cost was paid after frame construction, with 90% disbursed after completion. Going forward, 90% will be disbursed at the time of completion, with payments reflecting construction progress at three-month intervals. The remaining 10% will be paid at the time of quality inspection. To mitigate the risk associated with advance payments, mechanisms such as securing priority rights over trust assets will be further strengthened.

In order to encourage participation by private construction developers, purchasing standards will also be relaxed from today. To secure more volume, partial (unit, not whole building) purchases will be permitted, and the relaxed minimum purchasing criteria in regulated areas will immediately apply to all LH announced purchase rental projects from July 20. As a result, it is expected that LH will be able to additionally secure non-apartment supply that had previously not qualified for purchase.

Additionally, to promote early commencement of construction, a "start first, verify costs after" method is being used for projects with cost-linked contracts. This reflects the fact that some developments already under such arrangements are suffering significant delays during construction cost verification. For projects where cost verification is in progress or pending, the government will allow use of this system to shorten pre-construction procedures.

The Ministry of Land, Infrastructure and Transport plans to proactively identify and address on-site challenges at every stage of the new-build purchase rental program. Han Seongsu, Director General for Housing Welfare Policy, stated, "We will focus on rapidly supplying non-apartment rental homes, in which people can live safely without concerns about rental scams, offering monthly rents lower than market rates to alleviate housing burdens for young people."

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