In order to encourage capital expansion in the real estate PF business, the government is considering introducing requirements for the ratio of capital to business expenses when making PF loans for mutual finance, Yeojeonsa, and Saemaeul Geumgo. The 20% capital ratio requirement applied only to savings banks when making PF loans is being expanded to other industries. It was decided to differentiate provisions, such as applying a higher provisioning ratio to banks, securities and insurance companies that provide PF loans to businesses with low capital ratios.
The government jointly prepared a plan to improve the real estate PF system with related ministries and approved it as an agenda item at the Economic Relations Ministerial Meeting held on the 14th.
According to this, in order to raise the equity capital ratio of domestic PF business, which is low at about 5%, to the level of the United States and Japan, which exceed 30%, it was decided to induce capital expansion through risk management.
First, mutual finance, Women’s Warriors, and Saemaeul Geumgo, which do not apply risk weighting, introduce a 20% equity capital ratio requirement compared to business expenses when making PF loans, like savings banks. In the case of bank insurance securities companies, risk weights and provisions are differentiated based on the 20% capital ratio of PF business. The lower the equity capital ratio, the higher the accumulated capital/provision ratio to encourage the developer’s capital surplus.
In addition, considering that the delinquency rate of PF loans is higher than that of corporate loans, it was decided to revise the risk weight and provisioning regulations for PF loans by financial industry. It was decided to revise the limit regulations on real estate PF exposure by industry, including establishing large credit grant limits for real estate PF in some industries.
To reorganize these regulations, we plan to operate a financial sector TF in the first half of next year and revise the detailed supervisory regulations and PF risk management model standards for each industry. It was decided to implement it gradually after a certain period of delay, but not retroactively for PF loans before implementation.
Activating the development of in-kind investment methods and providing incentives related to capital expansion
Carrots (incentives) are also given to encourage developers to expand their capital. First, in order to increase the PF equity capital ratio, it was decided to encourage landowners to invest land and buildings in kind and receive dividend profits rather than purchasing land through bridge loans.
To this end, considering the delay in the realization of profits by investors when making in-kind investments in PF projects (REITs), it was decided to revise the Special Taxation Act within next year to apply taxation and payment deferral of capital gains. The government expected that if the development of in-kind investment methods is activated, the capital ratio will increase and the need for bridge loans will be reduced, thereby reducing project costs and improving business stability.
Data = Financial Services CommissionIf the developer increases its equity capital and operates the development project after completion, it is granted special urban regulations, such as relaxation of floor area ratio and public contribution. We plan to reflect the basic regulations in the Real Estate Development Project Management Act to be proposed in the first half of next year. In addition, the PF guarantee fee of Korea Housing & Urban Guarantee Corporation and Korea Housing Finance Corporation is discounted for businesses with low guarantee risk due to high equity capital ratio.
We decided to improve the system so that banks and insurance companies with ample capital can engage in the long-term rental housing business. In other words, the Banking and Insurance Business Act will be revised to allow banks and insurance companies to own more than 15% of the shares of long-term rental housing business corporations and establish subsidiaries, and participation in the long-term rental housing business through various methods such as funds will be allowed. In this case, it is expected that it will be possible to foster a comprehensive real estate company affiliated with a financial group like in Japan.
2024-11-14 00:13:00