The South Korean government is launching a financial support package featuring 600 billion won ($442 million) in special loans and up to 60% discounts on guarantee fees to ease the financial difficulties facing the construction industry amid the Middle East conflict.
The Ministry of Land, Infrastructure and Transport announced Wednesday it will work with the Construction Guarantee Cooperative, the Specialized Construction Guarantee Cooperative, and Korea Housing & Urban Guarantee Corporation (HUG) to implement the special loans and guarantee fee discounts. The measures are follow-up actions from a joint meeting of the construction and financial sectors chaired by the Prime Minister on January 8.
The two guarantee cooperatives will each provide 300 billion won in special loans, totaling 600 billion won. The Construction Guarantee Cooperative will offer up to 100 million won per member, while the Specialized Construction Guarantee Cooperative will provide up to 500 million won per member. Interest rates range from the late 2% to early 3% range depending on credit ratings, lower than market rates. The Construction Guarantee Cooperative will begin implementation next month, while the Specialized Construction Guarantee Cooperative will continue operating its existing construction stability special loan program, allowing immediate applications.
Guarantee fee discounts will also be provided. The Construction Guarantee Cooperative will apply discounts to members with credit ratings of BB or below, while the Specialized Construction Guarantee Cooperative will extend discounts to all members from May through the end of the year. Fees for subcontract payment and construction equipment rental payment guarantees will be discounted by 10%, while contract and performance guarantee fees required for construction delays due to raw material supply difficulties will be discounted by 30%.
HUG will offer 30% discounts on housing presale guarantee and redevelopment project loan guarantee fees. Developers obtaining both project financing loan guarantees and presale guarantees simultaneously can receive up to 60% in fee reductions. Implementation will begin in May and continue through May 2027, with the discounts also applying to partial guarantee issuances for previously approved projects.
"The construction industry is struggling with raw material supply difficulties and rising construction costs due to the Middle East war," said Kim Seok-gi, Director General of Construction Policy at the transport ministry. "We will do our best to minimize the financial burden and prevent construction delays in cooperation with related agencies."
