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Ruling party calls for expansion of guarantee for construction industry

Ruling party calls for expansion of guarantee for construction industry

Posted January. 28, 2023 07:43,   

Updated January. 28, 2023 07:43


The People Power Party has requested the government to expand loan guarantees to address financial difficulties in the construction industry caused by the increasing number of unsold houses resulting from decreasing prices. The ruling party has also called for support measures to address the "reverse lease crisis," such as lowering loan interest rates for landlords experiencing difficulty returning rental deposits due to declining lease prices.

On Friday, Chairman Ryu Seong-geol of the party’s Special Committee for Economic Stabilization held a meeting with representatives from real estate-related government agencies to discuss easing real estate industry regulations at the National Assembly. He spoke to the press later that day, “I asked for an expansion of the preemptive response system, including an increase in the guaranteed supply from the Housing and Urban Guarantee Corporation (HUG), as the number of unsold houses is rapidly increasing, and the impact on the construction and related industries is significant.”

In particular, the ruling party has instructed the HUG to take the lead in increasing the size of the guarantee if the number of unsold units in the construction market continues to rise. This year, the HUG has established a new loan guarantee program for unsold project financing (PF). It is a guarantee program where the housing developer is responsible for repaying the principal and interest for the project cost under the condition that they make efforts to resolve the issue of unsold houses. It is providing it in the amount of 5 trillion won to prevent financial difficulties and bankruptcy in the construction industry due to the lack of pre-sale payments.

The Ministry of Land, Infrastructure, and Transport reported, “We are discussing the expansion of guarantees for local business sites.” The Ministry of Land, Infrastructure, and Transport, the Ministry of Economy and Finance, and the HUG will discuss additional plans soon. Ryu said, “I will review the matters discussed at the HUG in detail and announce it later.”

The People Power Party has also called for countermeasures against the crisis, such as reducing the interest rate of the special Bogeumjari loan, which can be used for purposes such as returning rental deposits by borrowing up to 500 million won from the Financial Services Commission. The party stated, “Considering the future market situation and the available financial resources of the Korea Housing Finance Corporation, we have requested that the interest rate of the special Bogeumjari loan be adjusted (reduced) as much as possible to ease the burden of interest rates on landlords. We need to support landlords in using the special Bogeumjari loan to return rental deposits.”

In addition, the ruling party also called on the Ministry of Land, Infrastructure, and Transport to ease regulations for the real estate market by identifying areas that are subject to adjustment, districts where speculation is overheated, and areas prone to speculation.