9 out of 10 Seoul Redevelopment Projects Struggle with Relocation Costs Due to Loan Regulations

It has been reported that 9 out of 10 redevelopment areas in Seoul, which are set to relocate this year, are experiencing difficulties in securing relocation funds due to government loan regulations. As a result, there are growing concerns that the supply schedule for approximately 31,000 housing units may be disrupted.

On the 27th, the Seoul City government held a briefing and revealed that, after investigating 43 redevelopment project sites over a period of 7 months since July last year, 39 of them, which corresponds to 91%, are facing difficulties in securing relocation funds due to the government's loan regulation policies.

The government has applied regulations to relocation loans for redevelopment projects, including a loan-to-value ratio (LTV) of 40% for single homeowners, 0% for multiple homeowners, and a loan limit of 600 million won, following the measures to strengthen household debt management on June 27 and the housing market stabilization measures on October 15. Consequently, most project sites, except for 3 that completed management disposal approval before the enforcement date and 1 Moa Housing project that received approval for relocation loans from the Korea Housing Guarantee Corporation (HUG), are affected by these regulations.

Among the 39 regulated sites, 24 are redevelopment and reconstruction projects (approximately 26,000 units), while 15 are small-scale housing maintenance projects such as Moa Housing (approximately 4,000 units). These project sites are considering additional loans through construction company guarantees due to a lack of relocation funds, but they are inevitably facing the burden of high interest rates.

The funding conditions show a clear polarization depending on the scale of the project and the construction company involved. Large-scale redevelopment projects in areas like Gangnam can secure additional funding at interest rates 1 to 2 percentage points higher than the basic relocation funds, while small and medium-sized projects must endure interest rates that are 3 to 4 percentage points higher.

In particular, small-scale maintenance projects such as Moa Housing, which involve mid-sized construction companies, are at risk of project delays or halts during the relocation phase. In a Moa Town area in Myeonmok-dong, Jungnang-gu, many members of the association fall under the loan regulation category, and the construction company has refused to provide guarantees, causing difficulties in project advancement.

The Seoul City government pointed out that this situation is leading not only to increased financial burdens for association members but also to project delays and rising project costs. In fact, among the 35 sites facing difficulties in securing relocation funds, only 8 are capable of obtaining additional relocation funds, while 27 were found to have uncertain or impossible funding prospects.

In response, on the 22nd, the Seoul City government requested a reasonable adjustment of regulations, such as applying an LTV of 70% by separating relocation loans from general mortgage loans, during practical discussions with the Ministry of Land, Infrastructure and Transport. They also conveyed the damage status of 40 redevelopment project sites affected by loan regulations to the Ministry of Land.

Choi Jin-seok, head of the Housing Office of Seoul City, stated, "Relocation loans are not just simple household loans but essential project costs for housing supply," and emphasized, "We must urgently shift the policy paradigm to ensure that the scheduled housing supply timeline is not disrupted."