Calls to Ease Relocation Loan Regulations for Redevelopment Projects... Oh Se-hoon Visits Site, Says "Will Help"

91% of Seoul Redevelopment Projects Affected by Regulations
City Urges Exception to Raise Relocation Loan LTV to 70%
Government: Up to 1.1 Billion Won Possible Under Current Rules
Uncertainty Remains Over Regulatory Easing Amid Divergent Views

As red flags have been raised regarding the ability of association members to secure funds ahead of their relocation for redevelopment projects, the Seoul Metropolitan Government is repeatedly urging for measures to improve the profitability of redevelopment projects and to ease regulations on relocation loans. Under the current system, it is possible to raise up to 1.1 billion won by utilizing products such as jeonse loans, so further discussion is needed on whether the demands for easing relocation loan regulations will be accepted. On January 28, the day after he called for measures on relocation loans, Seoul Mayor Oh Se-hoon visited a redevelopment project site and expressed his intention to provide support.

Seoul Mayor Oh Se-hoon is conducting an on-site inspection at the Sillim 7 District redevelopment project site in Gwanak-gu, Seoul, on January 19, 2026. Photo by Dongju Yoon

According to the Seoul Metropolitan Government, the city plans to increase the number of general sales units by about 40 by applying a profitability adjustment coefficient to the redevelopment project area at 1152 Sinjeong-dong. The profitability adjustment coefficient is a mechanism that improves the profit structure of redevelopment projects by adjusting the floor area ratio or the number of units for sale. As the number of general sales units increases, the association's profits expand, thereby reducing the financial burden on association members. Since association members are facing difficulties in securing funds due to relocation loan regulations, Seoul intends to indirectly ease their burden by reducing the amount they need to contribute.

The issue of relocation loans is impacting redevelopment projects. Of the 43 redevelopment project zones in Seoul scheduled for relocation this year, 39 zones-about 31,000 households-are affected by loan regulations. This accounts for 91% of all project zones. At a redevelopment site in Dongdaemun-gu, Seoul, which was scheduled to begin relocation in February, the association attempted to secure additional relocation funds through the construction company. However, the construction company refused, citing concerns about its credit rating, resulting in difficulties in securing funds. In this process, some association members reportedly decided to give up their apartment allocation and instead opt for a cash settlement.

To prevent confusion caused by relocation loan regulations, the Seoul Metropolitan Government believes the government should revise the 'Financial Business Supervisory Regulations' to distinguish relocation loans for redevelopment projects from general mortgage loans and allow exceptions to the loan-to-value (LTV) ratio.

Under current regulations, there is no provision that separately defines relocation loans, so the same LTV standards as for household mortgage loans are applied. As a result, following the 'June 27 Household Debt Management Plan' and the 'October 15 Housing Market Stabilization Measures,' the LTV for relocation loans has been limited to 40% (up to 600 million won), and for multiple homeowners, the LTV is 0%, effectively making loans impossible. For association members eligible for '1+1 allocation'-receiving two apartments during reconstruction-loans are possible if they sign an agreement to sell one unit after completion.

The Seoul Metropolitan Government's call for regulatory revision is based on the belief that relocation loans for redevelopment projects should be recognized not as simple household loans, but as essential project costs for housing supply. The Financial Business Supervisory Regulations already include exceptions that allow for an increased LTV ratio within a certain range for mortgage loans to low-income or genuine homebuyers in regulated areas, as well as for first-time homebuyers.

Seoul believes that, in a similar manner, a 'targeted easing' provision should be introduced to allow the LTV ratio for relocation loans in housing-related redevelopment, reconstruction, and small-scale maintenance projects to be increased by up to 30 percentage points-up to a maximum of 70%-within the regulations.

However, it remains uncertain whether the financial authorities will accept this proposal. This is because, for single-homeowners, the authorities currently allow up to 600 million won in relocation loans and consider them as non-homeowners during the relocation period, permitting them to also receive up to 500 million won in jeonse loans. Although jeonse loans are included in the calculation of the debt service ratio (DSR), meaning the actual loanable amount may vary by individual, the financial authorities maintain that it is possible to secure up to 1.1 billion won in funding by combining relocation and jeonse loans. An official from the Financial Services Commission stated, "At present, there is nothing under official review or that has been formally communicated."

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