Restructuring of Troubled PF Projects Yields Positive Results

Financial authorities have successfully restructured more than 4.5 trillion won ($3.11 billion) worth of troubled real estate project financing (PF) projects. This achievement marks a turning point as the PF loan delinquency rate, which had been rising sharply, fell for the first time in 27 months.

According to the Financial Services Commission (FSC), total PF exposure, including PF loans, land-secured loans, and debt guarantees, stood at 210.4 trillion won as of the end of September, down 6.1 trillion won from 216.5 trillion won at the end of June. Loans requiring restructuring through measures like auctions or new capital injections amounted to 22.9 trillion won, accounting for 10.9 percent of the total PF exposure.

By PF type and industry, land-secured loans handled by secondary financial institutions were the largest category at 13.5 trillion won, followed by bridge loans at 4.8 trillion won and PF loans at 4.5 trillion won. Mutual finance had 10.9 trillion won, savings banks 4.4 trillion won, securities firms 3.8 trillion won, credit finance companies 2.7 trillion won, insurance firms 700 billion won, and banks 400 billion won.

As of the end of October, authorities had restructured or resolved 4.5 trillion won worth of projects, accounting for 21.4 percent. By the end of the year, they plan to complete restructuring of projects worth 9.3 trillion won, representing 44.5 percent of the total.

The PF loan delinquency rate in the financial sector was 3.51 percent as of the end of September, down 0.05 percentage points from the previous quarter. New PF loan issuance has exceeded 15 trillion won in both the second and third quarters of this year, indicating improved capital circulation.

However, the delinquency rate for land-secured loans in the secondary financial sector rose to 18.57 percent, highlighting the need for continuous monitoring and disposal of non-performing loans.

Kwon Dae-young, secretary general of the Financial Services Commission, stated that the restructuring and resolution of stalled projects are expected to facilitate housing supply and ease downward pressure on the construction industry. Approximately 35,000 housing units are anticipated to be supported by the restructured residential project loans.