'Issuance 0 Cases' Controversy Over Effectiveness of Urban Housing Special Guarantee... HUG "Proceeding Without Delay"

Special Urban Housing Guarantee Introduced in April Shows Low Performance
"Application Services Expanded to LH and SH... Performance Expected to Increase"
"Steady Progress to Support Private Sector Financial Assistance"

The Korea Housing & Urban Guarantee Corporation (HUG) responded to criticism that the newly introduced 'Urban Housing Special Guarantee,' launched in early April as part of the public rental housing expansion policy, has seen 'zero issuances' for nearly five months, stating that "there are no disruptions in guarantee issuance and efforts are ongoing."

On the 19th, HUG stated in a press release, "HUG will continue to ensure there are no disruptions in issuing guarantees to support financing for private developers who have signed purchase agreements with public institutions."

In early April, the Ministry of Land, Infrastructure and Transport and HUG established the 'Urban Housing Special Guarantee,' which helps developers constructing public rental housing through new purchase agreements with public institutions such as the Korea Land and Housing Corporation (LH) to obtain low-interest loans from financial institutions for up to 90% of the project cost.

At the time of the system's introduction, the Ministry of Land, Infrastructure and Transport promoted that "with the implementation of the Urban Housing Special Guarantee, private developers can start projects with only 10% of the project cost," and "actual loans are expected to be available from first-tier banks as early as the end of April."

However, nearly five months after the system's introduction, the number of issued guarantees remains zero, and only one application is currently under review, leading to criticism that the system has become ineffective.

Regarding this, HUG explained on the same day, "The Urban Housing Special Guarantee is currently under consultation at 10 project sites," and "as guarantee guidance and application services have expanded to LH and SH, an increase in performance is expected in the future." Although only one application has been received so far, it is anticipated that the number will grow.

HUG also addressed concerns that it is practically difficult to obtain a 90% loan on project costs because land costs prepaid by developers are excluded from the guarantee scope, stating, "It is possible to receive the Urban Housing Special Guarantee without first acquiring land ownership."

To receive the Urban Housing Special Guarantee, developers are generally required to acquire land ownership first, and land-secured loans typically cover 60-70% of the land purchase price. However, during loan consultations, HUG informed private developers that "guarantees cannot be issued for the 30-40% of land costs prepaid," leading industry voices to claim that "the 90% low-interest loan on project costs is exaggerated."

In response, HUG explained, "Developers pay a 10% land deposit and, upon signing the purchase agreement and meeting guarantee requirements, can secure land ownership through guaranteed loans and proceed with the project," adding, "refinancing of land-secured loans for land acquisition is also possible."

However, funds paid by developers themselves to secure land ownership remain excluded from the guarantee scope. For example, if a developer covers the self-financed portion during the process of obtaining a land-secured loan to receive the Urban Housing Special Guarantee, the guarantee cannot be issued. But refinancing is possible if the funds are procured through secondary financial institutions or others.

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