South Korean government delays residential PF capital requirements

The South Korean Financial Services Commission has announced a two-year delay for the implementation of equity ratio regulations on residential real estate project financing (PF). Originally set for 2027, the new regulations will now begin in 2029 with a 5% requirement, gradually increasing by 5 percentage points annually until reaching 20% by 2032.

To encourage funding for viable residential projects, banks and securities firms will receive incentives starting in 2027. If specific criteria regarding equity ratios and pre-sale rates are met, the risk weight for PF loans can be reduced from 150% to 100%, easing the capital burden on major lenders such as KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup.

In a separate move to facilitate international capital procurement, the Ministry of Economy and Finance is proposing amendments to foreign exchange regulations. The plan aims to simplify reporting procedures for long-term foreign currency borrowings by raising the threshold for prior reporting from $50 million to $100 million and transitioning to post-transaction reporting.

While these measures aim to support housing supply and financial liquidity, concerns remain regarding the rising delinquency rates in land-collateralized loans within small and medium-sized financial sectors, which reached 32.20% as of late June.