Urban Complex Project Restarts After Three Years... Relocation Loan Restrictions Pose Major Challenge

Ministry Launches First Candidate Site Call in Three Years
Sites Approved After October 15 Now Face Lending Restrictions
21 Out of 29 Project Sites Affected by New Rules

The urban public housing complex project, which aims to break ground for 50,000 new housing units in the Seoul metropolitan area, is facing challenges due to the relocation loan issue. The 6·27 lending regulations have capped the relocation loan limit at a maximum of 600 million won, raising concerns that residents may face increased financial burdens in securing necessary funds. While the Ministry of Land, Infrastructure and Transport has launched a new call for candidates for complex project sites, there are concerns that the effectiveness of public-led supply measures may be compromised.

According to the Ministry of Land, Infrastructure and Transport on March 16, the ministry initiated an additional call for candidate sites in Seoul for the first time in three years, starting March 11. Previously, from 2021 to 2023, the ministry selected 49 candidate sites for urban complex projects and designated 29 of them as complex districts. Of these, eight sites—including Jeungsan District 4, Yeonsinnae Station, and Banghak Station areas—have received project approval, while the remaining 21 are awaiting the approval process.

The urban complex project is designed to encourage housing supply in aging urban areas where private redevelopment is difficult and development has stalled. It does so through a public-led acquisition method that involves compensation in kind. The ministry projects that, if construction begins at all 49 sites—including the newly announced candidates—a total of 87,000 housing units will be supplied in the metropolitan area.

For the eight sites that received project approval prior to the October 15 policy measures last year, they are considered to be equivalent to having received management disposition approval under redevelopment project standards, allowing residents to continue accessing relocation loans with a loan-to-value (LTV) ratio of up to 70%. However, for sites approved after these policy measures, securing relocation funds will become more difficult. Due to the government's lending restrictions and the October 15 household debt management measures, the maximum basic relocation loan via Housing and Urban Guarantee Corporation (HUG) guarantee has been limited to 600 million won, and the LTV ratio is limited to 40%. Financial authorities are only granting exceptions to these lending rules for projects that received management disposition approval before the October 15 measures.

As a result, residents of sites that receive project approval after the October 15 measures are facing significant difficulties in securing relocation funds. Given that most of these sites consist of older villas and multi-family dwellings, securing both the return of lease deposits and relocation funds within the 600 million won cap is not easy. A representative from a Seoul urban complex project resident council said, "Since the majority of homes here are multi-family dwellings, elderly landlords often live together with tenants and rent out the remaining rooms. It's not easy to return lease deposits and secure a new place to live with less than 600 million won available as relocation funds."

The Ministry of Land, Infrastructure and Transport, as the main project operator, is aware of these issues and is considering alternatives. However, applying exceptions to relocation loan regulations specifically for public-led redevelopment projects would require coordination with financial authorities, which is proving difficult. Financial regulators are maintaining a firm stance on relocation loan restrictions, citing the need for household debt management.

A ministry official stated, "For sites approved going forward, residents will need to secure relocation loans within the next two years. There have been requests from residents that the current 40% LTV ratio is not sufficient to secure lease properties, so we are monitoring the situation and believe alternatives will be necessary for future project sites." The official added, "However, since the ministry itself cannot change the regulations, we are carefully considering possible alternatives."

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