Korea Land & Housing Corporation (LH) relaxed incentive criteria for mid-payment group loans to encourage bank participation. LH announced on the 6th that for apartment presale complexes where group loan bids failed, it will deposit the entire mid-payment amount for 60 days with no limit on the number of participating banks. The move responds to banks' reluctance to expand group loans due to household debt total volume regulations, which intensified after financial authorities announced in April a plan to limit total loan growth to around 1.5%. The policy shift aligns with President Lee Jae-myung's real estate supply expansion policy, following his May 23 directive to financial authorities to review support measures for presale buyers affected by regulations.
LH Expands Deposit Period and Removes Bank Participation Limits
According to financial sector sources on the 6th, LH implemented a second round of relaxations to its group loan agreement criteria for mid-payment loans on presale housing. For complexes where group loan bids failed after public announcement, LH will now deposit the entire mid-payment amount for 60 days with no restrictions on the number of participating banks. Previously, LH applied a maximum 60-day deposit period only for the initial mid-payment and only when one or two banks participated in failed auction complexes. LH significantly expanded incentives by removing limits on both the number of participating banks and the sequence of mid-payment installments eligible for extended deposit periods.
Banks Gain Low-Cost Deposits Through Extended Holding Period
When banks execute mid-payment loans, LH holds the funds and then transfers them back to banks to provide liquidity. Banks benefit from securing low-cost deposits for approximately two months if they can retrieve the mid-payment funds during this period. An LH official stated, "We experienced difficulties in selecting banks for mid-payment group loans due to total loan volume regulations, but we eased conditions through relaxed agreement terms including extended mid-payment deposit periods and reduced additional interest rate conditions to reduce inconvenience for presale buyers in loan execution."
Total Loan Volume Regulations Restricted Group Loan Participation
LH previously increased incentives for group loan handling in March by extending the deposit period for initial mid-payments and allowing interest rate adjustments for second mid-payments. However, as the household debt total volume management policy strengthened and financial authorities announced in April their intention to limit total loan growth to around 1.5%, banks closed the door on group loans, which are included in total volume calculations. Several complexes with failed group loan bids could not secure loan agreements despite multiple procurement attempts due to total volume regulations. Group loans are loans handled for specific projects during apartment presales and redevelopment projects, including mid-payment loans, balance payment loans, and relocation expense loans. As banks cannot increase household loan volumes due to government regulations, and credit loan balances such as minus bank accounts surged recently due to overlapping demand for "debt investment," room for group loans shrank further.
Financial Authorities Review Excluding Balance Payments from Regulations
As funding difficulties grew for borrowers who purchased presale housing due to total loan volume regulations, President Lee Jae-myung directed financial authorities on May 23 during a real estate discussion forum to review support measures for locations that received presale contracts before regulations, such as Maegyo Station Pellucid. While the Financial Services Commission is reviewing a plan to exclude balance payment loans from total volume regulations, LH's incentive expansion is seen as part of easing financial regulations that constrain housing supply. A banking sector official stated, "If the mid-payment deposit period increases, we can attract low-cost funds, which will be a factor in strengthening group loan handling."
FAQ
What did LH announce on the 6th regarding group loan criteria?
LH announced on the 6th that for apartment presale complexes where group loan bids failed, it will deposit the entire mid-payment amount for 60 days with no limit on the number of participating banks, expanding from the previous policy that applied only to one or two banks for initial mid-payments.
Why did banks reduce group loan participation?
Banks reduced group loan participation because household debt total volume regulations intensified after financial authorities announced in April a plan to limit total loan growth to around 1.5%, and group loans are included in total volume calculations, leaving banks with limited capacity as credit loan balances surged.
