Construction Guarantee Association Lowers Guarantee Fees and Increases Usage Limits

Expansion of Support for Union Members Amid the COVID-19 Crisis

The Construction Mutual Aid Association will lower guarantee fees and loan interest rates while increasing usage limits.

On the 1st, the Construction Mutual Aid Association announced that starting today, it will implement a system improvement plan focused on reducing guarantee fees and loan interest rates, as well as increasing guarantee and loan limits. This includes easing advance payment joint management, relaxing guarantee acceptance conditions for private construction projects, and other improvements aimed at reducing financial burdens on members and enhancing the convenience of association operations.

To stimulate the construction industry, which has been sluggish due to COVID-19, the association temporarily discounted advance payment and subcontract payment guarantee fees by 20% from last year until June 2021. In this regard, the association decided to permanently reduce these guarantee fees to help the construction industry overcome COVID-19. Additionally, to support small and medium-sized members in winning private construction contracts, the association lowered defect repair guarantee and contract guarantee fees for privately ordered projects by 20% and 10%, respectively. As a result, it is expected that the annual guarantee fee burden will be reduced by approximately 20 billion KRW.

Furthermore, the association increased the equity share limit and reorganized the limit calculation system. The total guarantee limit will increase by an average of 18%, and the financial guarantee limit will increase by about 28%.

The loan interest rate will be lowered, and the loan limit per unit will also be raised. The basic interest rate will be reduced by an average of 20%, and the delinquency interest rate will also be cut by 20%. After the reduction, the basic loan interest rate will be between 1.1% and 1.2%, which, considering the base rate hike, effectively supports members at the operational cost level. Through this, members are expected to reduce their annual interest burden by about 7.8 billion KRW.

Additionally, reflecting the increase in equity share amount such as profit reserves, the loan limit per unit will be raised by 200,000 KRW from the existing limit (excluding the basic number of licenses). This will raise members' loan limits from the previous 1,050,000 KRW to 1,100,000 KRW per unit to 1,250,000 KRW to 1,300,000 KRW per unit, depending on credit rating.

Members with a credit rating of B or higher will be excluded from the advance payment joint management system. The advance payment joint management system determines whether joint management applies based on advance payment amount, credit rating, and advance payment ratio, and manages a certain amount of advance payment jointly with the association, returning the jointly managed amount according to the progress rate.

Through this system improvement, members with a credit rating of B or higher will be excluded from the advance payment joint management target, and the joint management amount for members with a credit rating below B will be reduced to 10% of the advance payment.

This improvement will be applied retroactively, allowing withdrawal of advance payments currently jointly managed by the association under the existing regulations according to the improved standards. Upon implementation, the advance payment joint management amount will decrease by more than 90% compared to before, significantly reducing members' liquidity burdens and increasing operational convenience.

Conditions for private construction project fees and collateral collection will be eased by more than 50%. To support members in winning private construction contracts, the association will reduce the scope of special reviews for contract and advance payment guarantees, ease guarantee fees and collateral collection conditions by more than 50%, and completely abolish special reviews for subcontract payment guarantees at PF sites. Additionally, the exemption criteria for collateral collection on defect repair guarantees for apartment complexes and private construction projects will be expanded, and the collateral collection amount will also be eased by more than 50%.

This content was produced with the assistance of AI translation services.