Jugeumgong Supports Underperforming Projects Using Construction PF Guarantees

Temporary Operation of Special Guarantee Until the End of This Year

Korea Housing Finance Corporation (HF) announced on the 11th that it will launch a ‘Special Guarantee for Normalization of Construction Company-Deficient Project Sites’ product, which raises loan limits and extends the timing of financial support to normalize project financing (PF) sites facing difficulties due to construction company insolvency.

The special guarantee applies to PF sites using HF’s PF guarantees, where the construction company has become insolvent due to workout or rehabilitation procedures, but only if proactive self-help efforts such as reducing construction profits have been made according to the loss-sharing principle among project participants.

Apartment complex in Jeonnong-dong, Dongdaemun-gu, Seoul. Photo by Hyunmin Kim kimhyun81@

The main features of the special guarantee include three measures applied sequentially: loan repayment deferral, allowing financial institutions to obtain senior collateral over HF-guaranteed loans for newly raised funds, and additional PF guarantees for insufficient project costs.

Accordingly, whereas previously loan repayments had to be made in installments per interim payment phase, under the special guarantee, the entire loan can be repaid after project completion. Additionally, the loan limit is raised from 70-90% of the total project cost to up to 100%, and the timing of financial support is extended from before the resident recruitment announcement to the time of project completion.

To prevent moral hazard, HF also established tailored management measures for each project, such as requiring the project implementer to pay construction costs to the construction company according to the progress of the work to encourage cost savings, and operating a subcontractor direct payment system that pays subcontractors directly without going through the construction company.

Choi Jun-woo, President of HF, said, “Through support for PF sites facing difficulties, we will alleviate housing insecurity for those who have purchased units and fulfill our role as a public guarantee institution to help stabilize the construction market.”

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