"If You Want to Rebuild, You Have to Move"...Outstanding Relocation Loans Decrease Every Year [Real Estate AtoZ]

Outstanding Relocation Loan Balance Drops to 17.4 Trillion Won in May,
Down 400 Billion Won from Last Year

2 Trillion Won Decrease in Just Two Years

Number of Guarantee Recipients on the Rise

Project Delays Widespread Among Associa

Due to loan regulations imposed by financial authorities, the outstanding balance of relocation loans offered by banks has been declining year over year. In May of this year, the outstanding balance of relocation loans in the banking sector decreased by about 400 billion won compared to the same period last year, and has dropped by 2 trillion won compared to the same month two years ago. Reconstruction associations unable to secure relocation funds are inevitably facing delays in their projects. Critics argue that this situation goes against the government's stated intention to expand housing supply in urban areas.

A residential complex in downtown Seoul featuring both apartments and houses. Stock photo. Photo by Jo Yongjun jun21@

According to data submitted by Assemblyman Kim Taekyu's office—based on documents obtained from the Financial Supervisory Service on July 21, 2026—the outstanding balance of relocation loans in the banking sector, which stood at 19 trillion won in May 2024, fell by more than 1 trillion won to 17.4 trillion won in May 2025, and then declined by an additional 400 billion won in the same month this year.

A relocation loan refers to funds raised either to secure a rental home to stay in during the relocation period or to return deposit funds to tenants. There are two main types: the 'basic relocation loan', which is secured via guarantees from the Housing & Urban Guarantee Corporation (HUG) and obtained from financial institutions, and the 'additional relocation loan', which is arranged with the construction company’s credit enhancement. Of these, the additional relocation loan is classified as a business loan for relocation and is therefore not subject to regulations on household lending.

The ongoing decline in outstanding relocation loans is attributed to government regulations on household lending. Basic relocation loans are classified as household loans. Last year, as part of its June 27 policy package, the government capped the maximum limit for household loans—including relocation loans—at 600 million won. As a result, the outstanding loan balance, which stood in the 17 trillion won range as of June last year, dropped to 16.8 trillion won in July, when the impact of the loan regulations became more pronounced. Since then, it has seen minor fluctuations, but this year has remained around the 17 trillion won level.

Although the overall outstanding loan balance has decreased, demand for relocation loans has in fact increased. HUG provided relocation loan guarantees to 6,952 households between January and May of this year, a rise from 5,435 households in 2024 and 5,578 households last year.

At reconstruction sites in the greater Seoul area, the squeeze on funding due to credit regulations has hindered business progress. According to a recent survey conducted by the Seoul Metropolitan Government on 43 maintenance project zones scheduled for relocation at the beginning of the year, 39 of the sites—accounting for 91%, and involving 31,000 households—reported difficulties in securing relocation funds.

An official from a reconstruction association in Jangan-dong, Dongdaemun-gu, Seoul stated, "With the government lowering the loan-to-value ratio (LTV) for relocation loans to 40%, 80% of our members are struggling to secure funding. Furthermore, many members must relocate close to their current residences because of their children’s schooling, but with surging rental prices, financial difficulties are becoming even more pronounced." Similarly, a Cheongnyangni redevelopment association official said, "Although the Seoul city government is providing loan support for relocation funds, the stipulation that the support can only be given for properties with a first-priority mortgage is creating headaches for those who already have loans, as they find it more difficult to access additional support."

Experts argue that because relocation loans are essentially operating funds generated during the redevelopment process, they should not be treated the same as general household loans when it comes to regulation. Kim Deokrae, Senior Research Fellow at the Housing Industry Research Institute, commented, "The demand for funds necessary for relocation cannot be curbed simply by strengthening loan regulations. When access to primary banking channels is closed, associations are forced to look to additional relocation loans through construction companies, which only increases their financing costs." He further explained, "Since relocation funds arise temporarily during the redevelopment process and are repaid upon move-in, it is necessary to distinguish and manage them separately from regular mortgage loans."

Assemblyman Kim Taekyu criticized the current loan policies, saying, "Excessive lending regulation by the government is even tightening relocation loans for reconstruction projects, hampering the supply of urban housing. It is inconsistent for the government to promote expansion of supply while making even the first step of the process—relocation—so difficult." He added, "The financial authorities must thoroughly re-examine the regulations so that speculative demand is blocked, but relocation loans for genuine demand can be normally provided."

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