"Blocked Group Loans for Apartments"... Banks Await Guidance from the Financial Services Commission

Maegyo Station Pellucid: 50 Billion Won Loan Exhausted in 3 Minutes

Banks Warn, "Loosening Restrictions Individually Would Breach Caps and Undermine Fairness"

"Lending Policy Will Depend on Exceptional Measures by Financial Services Commission"

Commercial banks that have restricted group loans for the final payments on newly built apartment units are now looking to the Financial Services Commission for guidance. Although anxiety is mounting at new apartment move-in sites, banks state that because they have already reached, or are about to reach, the lending limit set by financial authorities, it is difficult to resume new group loans. They are waiting for an exception from regulators.

According to the financial industry on July 26, regarding the Maegyo Station Pellucid complex in Suwon, Gyeonggi Province (consisting of 2,178 units), set to begin occupancy on August 18, a 50 billion won group loan program prepared by Hana Bank was exhausted in just over three minutes after it opened at 10 a.m. on July 24.

This situation occurred because the loan limit allocated by the banks for this apartment complex did not even reach 10% of the total required amount. Assuming the required final payment group loan per household is 600 million won, up to 1.3068 trillion won would be needed, but the lending limits for the nine participating institutions—including banks and mutual finance firms—stand at only 5 billion to 50 billion won each. For now, banks say they have no plans for additional group loans beyond those already processed.

The loan issue at this complex was also discussed at the national real estate policy debate held on July 23, presided over by President Lee Jaemyung.

One participant, who identified as a future resident of Maegyo Station Pellucid, said, "I bought the apartment two years ago for genuine residential purposes, but due to the recent loan regulations, it is becoming difficult to prepare the final payment. We ask that exceptions or special measures be provided for end users who have already signed purchase contracts."

President Lee responded by directing Financial Services Commission Chairman Lee Eogwon to devise additional support measures, and the government and the commission are currently reviewing possible responses.

However, the banking sector maintains that they either already reached or are very close to reaching the household loan increase target set by the Financial Services Commission at the beginning of the year, making it difficult to voluntarily resume group lending. Financial institutions are concerned that exceeding the total loan growth quota assigned by FSC could lead to reduced lending limits or other disadvantages next year.

An official at Bank A commented, "Maegyo Station Pellucid is hardly the only complex requiring a group loan right now. If we loosen lending without careful consideration, excessive concentration could occur, and the permitted net lending quota could be exceeded." He added, "The apartment mentioned at the real estate policy debate alone has more than 2,000 units, and, by rough estimate, would require total additional loans of around 1.2 trillion won. What bank in Korea could absorb that?"

An official from Bank B explained, "Even without handling group loans such as interim, relocation, or final payment loans, banks are worried about the possibility of exceeding the overall household loan ceiling. If we approve large-scale final payment group loans, the volume could jump quickly and breach total lending caps, so banks are inclined to be cautious about group loans."

There is also criticism that selectively expanding group loans at a few high-profile new apartment complexes highlighted in the media would violate the principle of fairness. It is reported that not only the Maegyo Station Pellucid development, but also new apartment sites in Suwon, Pyeongtaek, and other metropolitan and major regional cities, are facing group lending restrictions.

A Bank B official remarked, "Group lending works by assigning an overall quota which is then distributed per project. Loosening the loan limit for one particular complex means diverting quota from other projects," expressing concern. Similarly, a Bank C official stated, "With total lending caps in place, allowing more loans in one location means reducing limits somewhere else."

Banks believe the Financial Services Commission should either raise the overall loan quota or introduce an exception for real demand homebuyers—such as single-home owners, newlyweds, or young people—so their lending is exempt from the cap in order to address the looming group loan shortfall.

Bank B explained, "The government needs to send a clear signal that it is willing to increase the lending quota overall or recognize group lending for real demand homebuyers as an exception. Only then can we consider providing additional financing." Bank A added, "Although President Lee has ordered a review, there has been no clear conclusion yet. Since banks must also manage risk, we will set our lending policy based on the outcome of discussions with regulatory authorities."

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