The Housing and Urban Guarantee Corporation (HUG) is taking steps to lower guarantee fees and expand PF loan guarantees to stimulate the construction market and enhance housing supply.
On June 9, HUG announced it will implement reforms including a reduction in guarantee fees, the introduction of new guarantees, and an expansion of PF guarantees to support housing developers facing liquidity challenges due to a sluggish real estate market and tightened PF loans.
HUG will temporarily lower the guarantee fees for housing sale guarantees and loans for maintenance projects until May 31, 2027. The fees for four types of guarantees, including housing sale guarantees, mixed-use development guarantees, officetel sale guarantees, and pre-occupancy rental deposit guarantees, will be reduced by 30%.
The pre-occupancy rental deposit guarantee was included in the fee reduction following feedback from registered rental business operators during a visit to the Gwangju and Jeonnam chapter of the Korea Housing Association in April.
For projects with PF loan guarantees, the discount on guarantee fees can increase up to 60%. HUG believes that by reducing the guarantee fee burden for housing developers who secure funding at lower interest rates through PF loans, it will help improve project viability.
The guarantee fees for loans supporting construction and project costs in redevelopment and reconstruction projects will also be reduced by 30% until May 31, 2027.
This fee reduction applies not only to new guarantee approvals but also to the remaining project costs for projects that have already received guarantee approval. The adjustments will be applied automatically without a separate application process.
HUG estimates that approximately 400 projects and 140,000 households will benefit from a total reduction of about 138 billion won in guarantee fees due to this initiative.
The scope and requirements for PF loan guarantees will also be relaxed. HUG has extended the special application period for PF loan guarantees from June 30, 2026, to June 30, 2027. New special provisions will also apply to rental PF projects that were previously ineligible.
The guarantee limit for sale PF guarantees will be increased from 50% to 70% of the total project cost. The requirements for upfront investment in land and total project costs will be eased. The rental PF guarantees will maintain a 70% guarantee limit while lowering upfront investment requirements. The ranking requirements for contractors will be eliminated for both sale and rental PF guarantees.
For housing developers looking to use HUG PF loan guarantees to repay already executed PF loans, the occupancy rate requirement will be relaxed from over 60% to over 50%. HUG expects that this measure, combined with the unsold housing buyback program, will help improve the financial stability of housing developers struggling with unsold units.
The application period for PF loan guarantees has also been expanded. Previously, applications could only be made before construction began, but now they can be submitted until the approval of the recruitment announcement for residents. This change allows projects that have already started construction to apply for guarantees.
The guarantee scope for market maintenance projects will also be expanded. HUG plans to include not only projects implemented by existing associations but also those carried out by market maintenance project corporations under special laws aimed at promoting traditional markets and shopping districts.
Industry experts believe that as the role of public guarantees increases, it will become increasingly important to monitor the financial conditions of individual projects and the actual construction circumstances.
Choi In-ho, President of HUG, stated, "The strengthening of guarantee support and regulatory revisions will provide substantial financial relief to housing developers facing liquidity crises. We will fulfill our role in ensuring smooth housing supply and the recovery of the construction market while preventing guarantee accidents through thorough risk management."
* This article has been translated by AI.
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