Government Launches First 600 Billion Won Future City Fund to Ease Funding Shortages for Redevelopment of Aging Planned Cities

Interest Rates in the 3% Range with HUG Guarantees

Institutional Improvements for Redevelopment Projects Underway

Follow-up Projects in First-generation New Towns Accelerate

The government will provide low-interest loans of up to 20 billion won in initial project funding per site for the reconstruction of aging planned cities, including the first-generation new towns. Through this initiative, the government aims to accelerate redevelopment projects and deliver tangible results in housing supply that the public can experience firsthand.

The Ministry of Land, Infrastructure and Transport announced on May 7 that it will launch the first Future City Fund, totaling 600 billion won, to ensure stable project financing for redevelopment projects in aging planned cities and begin providing initial project loan support.

The Future City Fund is a policy fund designed to reduce the financial burden of redevelopment projects in aging planned cities, enabling faster project progress. It was established following an explanatory session in March last year, the selection of fund managers, and the creation of investment trusts.

By utilizing this fund, redevelopment project implementers in aging planned cities can secure project funding at low interest rates, backed by guarantees from the Korea Housing & Urban Guarantee Corporation (HUG). According to the Ministry, if a construction company with an A- credit rating secures financing on its own, the interest rate is around 5.3% per annum. However, with HUG-guaranteed loans, the rate can be reduced to approximately 3.7% per annum.

Apartment complexes in Bundang District, Seongnam City, Gyeonggi Province. Photo by Yonhap News Agency

Project implementers that have completed the selection of a construction company can borrow up to 20 billion won in initial project funding. In the future, they can also borrow up to 60% of the total project cost as main project funding.

For detailed information about the initial project funding loan, inquiries can be made to the HUG Western Fund Center and Woori Asset Management. Information is also available on the HUG website under the menu 'Personal Guarantee → Other Personal Guarantees → Financial Guarantee for Redevelopment of Aging Planned Cities.'

The Ministry will also announce a draft amendment to the subordinate statutes of the Act on Redevelopment of Aging Planned Cities this month, aiming to streamline project procedures. The amendment will undergo regulatory review, legislative examination, and deliberation by the Vice Ministers' and Cabinet meetings, with the goal of promulgation in August.

This amendment will specify details delegated by the revised Act on Redevelopment of Aging Planned Cities, which comes into effect on August 4. The system for designating preliminary project implementers, which was piloted in leading districts, will also be expanded. The Ministry expects this will speed up follow-up projects in the first-generation new towns.

In the first-generation new towns, eight leading districts have completed their designation as special redevelopment zones. Local governments are currently working on selecting project implementers and construction companies, as well as receiving proposals for follow-up projects from residents.

Of the eight leading districts, two in Sanbon, Gunpo-si, Gyeonggi Province, have Korea Land & Housing Corporation (LH) designated as the project implementer. In Sanbon District 9-2 and District 11, LH was designated as the project implementer on March 19 and March 27 respectively. In Anyang-si, Gyeonggi Province, six special redevelopment candidate zones, covering a total of 14,102 households, have applied for preliminary consultation on special redevelopment plans.

To prevent construction cost disputes during contractor contract processes after the designation of special redevelopment zones, the Ministry will also provide pre-contract consulting services, conducted by the Korea Real Estate Board, to leading districts.

The pre-contract consulting will guide stakeholders on how to use the 'Standard Construction Contract for Redevelopment Projects' and explain the construction cost verification system that applies in the event of increased costs. Through these measures, the Ministry aims to reduce information gaps between residents and contractors and prevent construction cost disputes.

Kim Youngguk, Director General of Housing Supply at the Ministry of Land, Infrastructure and Transport, stated, "With the creation of the Future City Fund, we expect to ease the large-scale funding burden for redevelopment projects in aging planned cities and speed up project implementation. Through institutional improvements and cooperation with local governments, we will ensure the smooth commencement of 63,000 housing units in first-generation new towns by 2030, as outlined in the 9·7 Measures."

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