The government is set to advance a plan to convert real estate project financing (PF) sites that have stalled or been delayed due to financial difficulties into rental housing managed by the Korea Land and Housing Corporation (LH). This initiative aims to simultaneously normalize projects and provide housing for youth and newlywed couples.
On August 26, the Ministry of Land, Infrastructure and Transport, the Financial Services Commission, LH, and the Financial Supervisory Service announced that they will implement this conversion as a follow-up to the 'Rapid Housing Supply Plan.'
The goal of this initiative is to quickly supply well-located housing while alleviating the burden of unsold units for developers, thereby reviving halted projects.
The government and related agencies will hold a meeting on August 27 to review the progress of the initiative and discuss regular collaboration among institutions to support the conversion of PF sites into LH rental housing.
Since last year, the Financial Services Commission and the Financial Supervisory Service have been providing information on PF sites interested in participating in the LH rental housing program to the Ministry of Land and LH. After reviewing potential sites, LH informs developers through the Financial Supervisory Service, and once a developer confirms their intent to sell, a review process is conducted before a purchase agreement is finalized.
Last year, agreements were made for 12 projects, totaling 2,600 units. The government plans to expand the scope and types of projects starting this year. Previously, the focus was on projects that had encountered difficulties, but this year, sites that are progressing normally but face delays in funding will also be considered.
The types of purchases will also expand beyond new construction agreements to include existing properties. Projects that have already been completed or are nearing completion may also qualify.
The government will enhance tax incentives and financial support. The tax reduction rate for land and building acquisition for new construction projects will be increased, and LH's land acquisition support will be raised from 70% to a maximum of 80% of the existing land cost. In regulated areas of the metropolitan area, the cost method will be applied to reflect construction cost increases in the purchase price.
The Financial Supervisory Service and LH have already conducted a preliminary review of potential sites based on location and rental demand. They are currently confirming the sale intentions of developers, and submitted projects will undergo a purchase review, aiming for agreements on new construction or existing properties by the end of the year.
LH will also participate in a briefing on the sale of distressed PF projects hosted by the Financial Supervisory Service on September 15, where they will provide explanations about the rental housing program and offer on-site consultations.
The government plans to supply the housing secured through this initiative as rental units for youth and newlywed couples in urban areas, particularly near transportation hubs. It is expected that these homes can be offered at rental prices lower than market rates.
The success of this initiative will depend on whether the normalization of PF projects translates into actual housing supply, rather than just stabilizing the financial market.
Cho Seong-tae, head of the Housing Welfare Support Division at the Ministry of Land, stated, “PF projects are the fastest resources to become homes. We will actively utilize rental housing to ensure that halted projects can become homes for youth and newlywed couples.”
* This article has been translated by AI.
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