PriyaPatelTLDR:
- Deputy Prime Minister and Finance Minister Choi Sang-mok has pledged to enhance Korea’s project financing (PF) structure in order to prevent another real estate crisis.
- Choi stated that the current PF structure in Korea is weak compared to advanced countries, with 95% of the total development cost reliant on loans.
- The finance minister plans to provide liquidity to healthy PF businesses and restructure businesses at risk of insolvency.
- Additionally, Choi intends to improve the fundamental system of project financing in real estate through dedicated research projects.
The Deputy Prime Minister and Finance Minister of South Korea, Choi Sang-mok, has promised to strengthen the project financing (PF) structure in order to prevent another real estate crisis. Speaking on a show on KBS, Choi highlighted the weakness of the current PF structure in Korea, stating that it is notably weaker compared to advanced countries. He explained that unlike in advanced countries where land acquisition is often financed with personal funds, in Korea, loans are initiated from the moment of land acquisition. This reliance on loans, with 95% of the total development cost being funded through them, makes the real estate PF structure vulnerable to collapse when presale prices plummet.
In order to prevent the real estate PF crisis from spreading and impacting the financial sector and the economy, Choi has pledged to facilitate a soft landing. This includes providing liquidity to healthy PF businesses and restructuring businesses that are at risk of insolvency. Additionally, Choi plans to improve the fundamental system of domestic project financing in real estate through dedicated research projects.
The finance minister’s commitment to enhancing the project financing structure in Korea is aimed at avoiding a repeat of the real estate crisis. By strengthening the PF system, it is hoped that the real estate market can become more stable and resilient, reducing the impact on people’s livelihoods. With a focus on providing liquidity and undertaking research projects, Choi aims to address the weaknesses in the current PF structure and ensure a more sustainable approach to real estate development in Korea.
