The balance of real estate project financing (PF) loans has increased for the first time since the end of 2023. As new funding from financial institutions expands, the PF market shows signs of recovery, with a slight decrease in delinquency rates. However, some sectors of the second financial industry, such as mutual finance, are experiencing worsening indicators, highlighting a growing disparity in financial health across sectors.
According to the Financial Services Commission on October 13, the balance of PF loans in the financial sector was 115.8 trillion won as of the end of June, an increase of 3 billion won from the end of March (115.5 trillion won). This marks the first increase in PF loan balances since the end of 2023.
New funding has also expanded. In the second quarter of this year, the new issuance of PF loans reached 23.5 trillion won, up 6.7 trillion won from the previous quarter (16.8 trillion won). Notably, the balance of PF loans in the banking sector increased from 43.2 trillion won to 45.2 trillion won, a rise of 2 trillion won. Financial authorities explained that funding was concentrated on projects with good business viability and high progress rates.
The delinquency rate for PF loans was 4.56% as of the end of June, down 0.09 percentage points from the previous quarter (4.65%). The total PF exposure also decreased by 1 trillion won to 168.8 trillion won. The amount of loans classified as caution or concern (C&D) was 15.1 trillion won, a reduction of 1.3 trillion won from the previous quarter.
However, the financial health indicators varied by sector. The delinquency rate for mutual finance PF loans surged from 5.51% at the end of March to 10.79% at the end of June, an increase of 5.28 percentage points. The delinquency rate for land collateral loans at savings banks rose from 30.03% to 35.16%, while the rate for specialized credit finance companies increased from 42.14% to 46.55%. The overall delinquency rate for land collateral loans also rose by 0.32 percentage points to 32.20% compared to the previous quarter.
Financial authorities plan to simultaneously address troubled projects and provide funding to viable ones. As of the end of June, a total of 19.7 trillion won in restructuring and liquidation has been carried out among projects classified as caution or concern. This includes 14.4 trillion won in the sale and write-off of bad debts and 5.3 trillion won in restructuring through new funding.
Regulatory measures to promote housing supply have also been confirmed. The capital ratio regulation for PF in residential projects will be postponed for two years, with a gradual increase starting at 5% in 2029 and reaching 20% by 2032. In contrast, regulations for non-residential projects will be implemented as originally planned starting in 2027.
Financial authorities will closely monitor 279 residential projects in regulated areas of the metropolitan area and plan to take follow-up measures, including the establishment of a new 3 trillion won KAMCO fund and the expansion of PF guarantees.
* This article has been translated by AI.
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