Finance minister pledges enhancements to project financing structure

"Korean-style project financing in real estate will collapse when presale prices plummet. Given the current PF structure, the real estate crisis is bound to repeat itself."

Deputy Prime Minister and Finance Minister Choi Sang-mok made this comment on the Korean real estate PF crisis during a show on KBS, Sunday Diagnosis Live, on Sunday. “Unlike purchasing land with personal funds in advanced countries, in Korea, loans are initiated from the moment of land acquisition,” Choi said. “With 95% of the total development cost reliant on loans, Korea's real estate PF structure is notably weaker compared to advanced countries.”

Choi said that he would facilitate a soft landing to prevent the real estate PF crisis from spreading to the financial sector and the economy, impacting people’s livelihoods. “We will make efforts to provide liquidity to healthy PF businesses and restructure businesses with the potential for insolvency,” the finance minister said. “We will also improve the fundamental system of domestic project financing in real estate through dedicated research projects.”


dhlee@donga.com