▲ Financial Services Commission
The government has finalized a plan to defer project financing (PF) equity ratio regulations for residential development sites by two years to boost housing supply.
Related agencies including the Financial Services Commission, the Financial Supervisory Service, the Ministry of Economy and Finance, and the Ministry of Land, Infrastructure and Transport made the decision during a meeting held today (October 13) to review the real estate PF situation and financial support measures for promoting housing supply.
For residential sites, the implementation of regulations regarding PF equity ratios, soundness and provisioning alignments, loan eligibility requirements, and risk-weight adjustments will be postponed for two years.
Following this, the equity ratio is planned to be raised step-by-step starting at 5 percent in 2029.
However, non-residential sites will be subject to PF equity ratio regulations starting in 2027 as originally planned, and PF cap regulations and sector-specific soundness regulations will also be implemented on schedule.
The risk-weight adjustment is a scheme that differentiates risk weights for business sites that meet an equity ratio of 20 percent.
For non-residential sites, this will be introduced at 20 percent starting in 2027, whereas for residential sites, it will begin at 5 percent in 2029 and be gradually increased by 5 percentage points at a time.
Nonetheless, banks and securities firms will be able to introduce the system starting in 2027 so that risk weights can be eased if they meet the 5 percent equity ratio during 2027 and 2028.
The government stated, "We have provided clear incentives for financial sector funding support targeting residential sites," adding, "It is expected that difficulties with bridge loans will be resolved and many PF projects will proceed swiftly."
The financial authorities plan to assign dedicated managers to each of the 279 residential sites in the Seoul metropolitan regulated areas for close management.
As of October 2, 47 grievances had been received by the PF and Construction Company Financial Difficulty Resolution Center, which has been operated by the Financial Supervisory Service and the Korea Development Bank since September.
Among them, consultations and reviews have been completed for 27 cases, while 20 cases have been assigned to responsible agencies.
Meanwhile, PF exposure at the end of June stood at 168.8 trillion KRW, down 1 trillion KRW from the previous quarter.
Although the downward trend has continued since the end of 2023, when it reached 231.1 trillion KRW, the pace of decline has slowed.
The balance of PF loans recorded 115.8 trillion KRW, increasing for the first time since the end of 2023 (135.6 trillion KRW).
New PF loan originations in the second quarter of this year also reached 23.5 trillion KRW, an increase of 6.7 trillion KRW from the end of the previous quarter.
The government evaluated that new funds are being smoothly supplied, centered around business sites with sound project feasibility and a high degree of progress.
The delinquency rate on PF loans at the end of June was 4.56 percent, down 0.09 percentage points from the previous quarter.
This is interpreted as the result of PF loans increasing for the first time in two and a half years, alongside financial institutions cleaning up troubled assets.
As a result of PF project feasibility evaluations, credit rated as cautious (C) or insolvent (D) amounted to 15.1 trillion KRW, a decrease of 1.3 trillion KRW from the previous quarter.
This accounts for approximately 9.0 percent of total exposure.
By the end of June, 19.7 trillion KRW worth of cautious or insolvent project sites had been liquidated or restructured.
Soundness indicators also improved, with the PF substandard-to-below loan ratio falling by 10.0 percentage points and the PF delinquency rate dropping by 7.3 percentage points.
The government stated, "Under the basic principle of improving the fundamentals of the real estate PF market, we will thoroughly manage the soundness of financial companies."
(Photo: Yonhap News TV, Yonhap News)
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