Gov’t relaxes loan restrictions for jeonse deposit refund

The government intends to ease loan restrictions for homeowners to address the recent increase in defaults on the refund of long-term rent deposits, primarily caused by the decline in the price of jeonse (key money-based house rental system). The fair market value ratio of this year’s comprehensive real estate holding tax will remain unchanged compared to the previous year. Meanwhile, the comprehensive real estate holding tax will be maintained at the 2020 level.

During a briefing on the economic policy for the second half of 2023, Vice Minister and Economic Minister Choo Kyung-ho announced that loan restrictions related to the refund of the difference in jeonse deposits, caused by a decrease in jeonse prices, will be temporarily eased for one year.

As a result, the government intends to implement a temporary measure that will lower the debt service ratio (DSR) to 40 percent and the debt-to-income ratio (DTI) to 60 percent, provided that the homeowner borrowers refund jeonse deposits to their tenants. This measure is set to commence at the end of July.

Based on the government’s analysis, an individual with no existing loans and an annual income of 50 million won would see their loan limit increase by 175 million won if they were to borrow a loan with a 4 percent interest rate and a 30-year maturity period.

The government has decided to maintain the fair market value ratio, which is used to determine the tax base for the comprehensive real estate holding tax, at 60 percent, the same as the previous year.


Do-Hyong Kim dodo@donga.com