Ministry of Land, Infrastructure and Transport Launches 1 Trillion Won PF Development Anchor REIT to Support Private Housing Supply

The government is launching a 1 trillion won Project Financing (PF) development anchor REIT to resolve funding shortages in private development projects and accelerate housing supply by injecting public funds as a catalyst.

The Ministry of Land, Infrastructure and Transport announced today (June 17) that it has completed the formation of the 1 trillion won PF development anchor REIT and will begin accepting applications for investment projects starting tomorrow (June 18).

The PF development anchor REIT is a program where the public sector makes preemptive investments in high-quality development sites that are struggling to secure initial funding due to the recent contraction in the real estate PF market, thereby encouraging the inflow of private capital.

The government invested 200 billion won in public funds and attracted approximately 320 billion won in private investment. By borrowing through corporate bonds guaranteed by the Korea Housing & Urban Guarantee Corporation (HUG), a total of 1 trillion won in investment capital has been secured.

The development anchor REIT will operate for the next five years.

The mechanism involves investing in bridge loan projects at the land acquisition stage for approximately one year and six months, and then reinvesting the recovered funds into other projects.

The investment scale per project is limited to 50% of the land acquisition cost, with a maximum of 100 billion won.

The investment interest rate will be determined through consultations between the project operator and the Asset Management Company (AMC), taking into account project risks and market conditions.

Based on senior debt investment, the plan is to provide funding at a rate lower than market financing costs, specifically at the 3-year AAA-rated corporate bond yield plus 250 to 300 basis points (1bp = 0.01 percentage points).

Project operators wishing to apply for investment can submit their applications through the websites of Koramco Asset Trust or Korea Real Estate Investment & Trust starting tomorrow.

(Photo courtesy of Ministry of Land, Infrastructure and Transport, Yonhap News)
※ Please note: This article was translated by AI and may contain errors.