Korea Housing and Urban Guarantee Corporation President Choi In-ho poses to mark the launch of the financial guarantee product for private-participation public housing projects. [HUG]
Korea Housing and Urban Guarantee Corporation President Choi In-ho poses to mark the launch of the financial guarantee product for private-participation public housing projects. [HUG]

The Korea Housing and Urban Guarantee Corporation announced Tuesday the launch of a new financial guarantee product — the "Private-Participation Public Housing Project Financial Guarantee" — designed to support funding for construction companies taking part in public housing projects jointly developed by the Korea Land and Housing Corporation and private developers, in line with the government's Sept. 7 housing supply activation measures introduced last year.

The newly created guarantee product is a financial support model tailored specifically to public pre-sale housing projects carried out under a direct settlement method, combining the credibility of the public sector with the technical capabilities of private construction companies.

Under the direct settlement method, a construction company first secures and advances construction costs, completes the public housing project, and then receives reimbursement from the Korea Land and Housing Corporation.

Construction companies have long struggled with this arrangement, having to rely on high-interest loans based on their own credit ratings or tap internal funds to cover upfront costs. According to the Korea Construction Industry Institute, the Construction Business Survey Index stood at 71.5 in May, up 6.3 points from the previous month, but still well below the baseline of 100.

HUG developed the tailored public housing guarantee to address these on-the-ground difficulties and support the government's housing supply policy. The product significantly eases and streamlines review and operational standards, taking into account the unique project structure in which LH and private developers co-develop the housing and LH directly settles construction costs after completion.

Guarantee limits vary by public pre-sale housing type: standard public pre-sale housing is covered up to 80 percent of total project costs, while categories such as Newlywed Hope Towns are eligible for coverage of up to 90 percent.

The product applies a single annual guarantee fee rate of 0.324 percent, which is expected to substantially reduce financing costs for construction companies struggling with liquidity amid the current high-interest-rate environment. It also maximizes accessibility for small and mid-sized construction companies that have the construction capabilities but have been deterred from participating in projects due to financial burdens.

To ensure stable guarantee operations and transparency in fund disbursement, guarantee certificates will be issued in installments linked to progress inspections conducted by the Korea Land and Housing Corporation.

HUG also plans to sign an MOU with the Korea Land and Housing Corporation this month to formalize mutual cooperation arrangements for smooth guarantee operations, and will hold a briefing session for construction companies participating in private-participation public housing projects. The session will cover the guarantee product's structure, key details and operational procedures, and will include a question-and-answer segment to gather feedback from the field, with the aim of ensuring the new guarantee regime takes root quickly.

HUG said it expects the financing support provided through the new product to help deliver quality public housing on schedule, contributing to broader supply activation. The corporation also anticipates that construction companies will be able to resolve liquidity risks and focus more fully on their core responsibilities of improving construction quality and managing safety.

"This financial guarantee for private-participation public housing projects is a mutually beneficial financing model born out of close communication and consultation with the Ministry of Land, Infrastructure and Transport, the Korea Land and Housing Corporation and the private construction industry," President Choi In-ho said. "We will continue to listen to voices from the field through the newly established special consultation window and the upcoming briefing session, and will fulfill our role as a reliable pillar supporting residential stability for the public and the health of the construction industry."

Detailed eligibility criteria and application procedures for the guarantee product are available through HUG's special consultation window, with further information to be posted on the corporation's official website at a later date.


hss@heraldcorp.com