Real Estate Project Financing Fees Reduced as Financial Supervisory Service Acts

The Financial Supervisory Service (FSS) has reported significant improvements in the management of fees related to real estate project financing (PF). Following a review, the number of fee categories has been consolidated from a peak of 32 to just 11, and penalties and extension fees have been reduced to zero.

On May 18, the FSS held a meeting in Yeongdeungpo-gu, Seoul, with representatives from financial companies and associations to discuss the findings of this review and necessary improvements.

The review targeted 17 financial companies, particularly those with high volumes of new PF transactions, to assess the effectiveness of the 'Best Practices for Real Estate PF Fees' introduced in January of last year.

The results indicated that most financial institutions are now operating in accordance with these best practices. Since the implementation of the guidelines in January 2025, the number of fees associated with new and extended real estate development projects has decreased significantly.

Previously, the FSS had introduced guidelines that limited the imposition of fees to those directly related to service performance. The amount collected from penalty fees for new PF transactions, which had reached 6.4 billion won in 2024, has dropped to zero since February of last year. Similarly, extension fees, which totaled 9.3 billion won in 2024, have not been collected since February 2025.

Additionally, 100% of the companies reviewed have incorporated the PF fee guidelines into their internal regulations. The rates for preparing and distributing service execution plans were 88%, while the rates for preparing and distributing final reports were 82%. The establishment of separate internal control standards for PF fees was reported at 76%, and measures to prevent unfair business practices were noted at 88%.

However, some financial institutions were found to have shortcomings. Instances were noted where fees of a nature permitted under the guidelines were still being charged under their previous names, such as asset management fees and private bond underwriting fees. There were also cases of formal compliance with the preparation of service execution plans and final reports, and deficiencies in internal control mechanisms for verifying the appropriateness of PF fees and preventing conflicts of interest among employees.

The FSS plans to continue monitoring the appropriateness of PF fee operations and risk management systems among financial companies.

Kim Wook-bae, Deputy Director of Consumer Protection at the FSS, emphasized the importance of rational fee management to enhance fairness, transparency, and trust in real estate PF financing. He urged companies to ensure that the best practices are effectively integrated through regular employee training and the refinement of internal control procedures.