Saemaeul Geumgo Also Tightens Real Estate Loans... Mutual Finance Sector Faces Urgent Risk Management

[Asia Economy Reporter Bu Aeri] As the real estate market stagnates and the capital market tightens, the financial sector has also begun cracking down on real estate-related loans. Mutual financial institutions, which have so far benefited from real estate project financing (PF) loans, are now tightening related loans. They are taking measures one after another to prepare for risks such as concerns about insolvency. Borrowers such as construction companies are becoming increasingly worried, and the sales market is inevitably facing damage.

According to the financial sector on the 27th, the National Credit Union Federation of Korea recently issued guidelines to frontline credit unions to be conservative in extending the maturity of large-scale project loans. A credit union official explained, "It is not a complete suspension, but it is moving in a similar direction," adding, "It means that, except for exceptional cases, it is preferable not to do so."

Large-scale project loans refer to collective loans jointly conducted by credit union cooperatives. For example, when apartments are sold in Seoul, land is developed and a project operator is selected. The selected construction company usually takes several years to sell and complete the construction. Since the loan amount is large in this case, several cooperatives sometimes come together to provide the loan.

In fact, NongHyup and ShinHyup have even declared a suspension of loans. According to NongHyup Central Association, from the 4th of next month, new joint loans related to real estate development will be suspended. NongHyup's joint loans involve multiple cooperatives handling credit together, including loans for land purchase funds. This is a measure to prepare for risks as the risk of real estate development increases. A NongHyup Central Association official explained, "Because signs of risk related to real estate development projects have appeared and the delinquency rate of real estate PF has increased, concerns about insolvency have risen."

ShinHyup also suspended new apartment collective loans from the 21st. Mid-term payment loans, relocation loans, and burden charge loans have been suspended. ShinHyup's collective loans are credits executed jointly with blanket approval without individual screening for new apartment sales or for prospective residents of reconstruction and redevelopment. However, loans are expected to resume normally from January 1 next year. A mutual financial sector official said, "Although the delinquency rate is not yet a concern, there is a concern that the delinquency rate will increase from next year, so there is a conservative atmosphere regarding risk management for large-scale project loans."

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