South Korean residential real estate project financing

The South Korean government has adjusted its regulatory approach to residential real estate project financing (PF) to manage liquidity and housing supply. The Financial Services Commission announced a two-year delay for implementing equity ratio regulations, pushing the start date from 2027 to 2029. Under the new plan, a 5% equity requirement will be introduced in 2029, increasing by 5 percentage points annually until it reaches 20% in 2032. To support lenders, the government will offer incentives, such as reducing risk weights for PF loans if specific equity and pre-sale criteria are met.

Despite these regulatory shifts, data indicates a growing reliance on public guarantees for projects with low developer equity. Reports from the Korea Housing & Urban Guarantee Corporation (HUG) and the Korea Housing Finance Corporation (HF) show that a significant majority of new PF guarantees are being issued for projects where developer investment is 5% or less of the total cost. At HUG, the proportion of such low-investment projects rose from 50% in 2021 to 70.6% in 2026. Experts have warned that this trend increases the risk of financial losses being transferred to public institutions if these high-leverage projects fail.