Although relocation expenses will be increased... Redevelopment projects face 'confusion' over 'post-development asset' criteria

Newsis [Financial News] Although the government expanded the criteria for calculating relocation loans for redevelopment projects to include post-development asset valuations through the August 13 real estate measures, both homeowner associations and the financial sector are experiencing confusion due to the lack of specific application standards. Concerns are also being raised that if project procedures, such as the lottery for unit numbers, are accelerated during the post-development asset valuation process, relocation could actually be delayed. According to industry sources on the 23rd, the construction industry plans to petition the government regarding procedural issues that may arise during the application of post-development asset valuations.
The intention is to request the establishment of specific calculation standards and supplementary measures, as projects could be delayed due to the interplay between current redevelopment procedures and loan screening criteria. It has been confirmed that banks, which are responsible for executing loans, have also requested that financial authorities clarify the standards. At a meeting held by financial authorities on the 19th to discuss follow-up measures for household loans, banks conveyed their opinion requesting that specific criteria and procedures be established for applying post-redevelopment asset valuations to group loans.
In fact, Redevelopment Project Site A in Gyeonggi Province is also negotiating relocation loans with banks based solely on pre-redevelopment asset valuations. Discussions on applying post-redevelopment assets have not taken place because it is unclear whether "post-redevelopment assets" refer to the sale price of the housing type requested by the members or the appraised value reflecting surrounding market prices after completion.
In these measures, the government changed the standard for calculating the Loan-to-Value (LTV) ratio for relocation loans from the existing pre-redevelopment asset valuation to a method that applies the larger of the pre-redevelopment and post-redevelopment asset valuations. This measure is intended to increase the borrowing capacity of members who were struggling to secure relocation expenses due to low pre-redevelopment asset values.
The problem is that it is unclear at which stage of the urban renewal project post-redevelopment assets should be calculated. The post-development asset value refers to the appraised value of newly built housing.
While the Financial Services Commission explains this based on the documents submitted upon the approval of the management and disposition plan, criticism has arisen that the actual application criteria are ambiguous, as changes in plans, changes in association members, and lotteries for unit numbers continue even after approval. In particular, if the value of the allocated housing is reflected in the post-development asset value, the timing of the unit number lottery becomes a variable.
If the lottery, which is typically conducted after relocation, is brought forward for the sake of loans, a re-lottery must be held when the management and disposition plan is amended, potentially delaying the project schedule. An industry official stated, "If the unit number lottery is brought forward and the management and disposition plan changes, a re-lottery and public complaints become inevitable.
" He added, "While we agree with the intent to increase relocation expenses by reflecting post-development assets, the possibility of project delays must also be considered. " The applicability of so-called "lid" structures—unauthorized buildings in redevelopment projects—is also a point of contention.
Given that obtaining relocation loans was virtually impossible due to pre-redevelopment asset values ​​amounting to merely tens of millions of won, there were expectations for the application of post-redevelopment asset limits; however, critics point out that the policy's effectiveness may be limited if these assets are excluded from the scope of application. However, the Ministry of Land, Infrastructure and Transport maintains that there will be no significant change from the existing situation, as HUG guarantee limits will apply to unauthorized buildings as well.
A Ministry official stated, "Limits based on previous standards are applied during the HUG guarantee process. Unauthorized buildings can be viewed as being almost identical to the existing situation.
" While experts agree with the policy direction of expanding relocation expenses, they point out that loan regulations themselves should be simplified rather than adding complex exception criteria. Kim Je-kyung, Director of Tumi Real Estate Consulting, said, "It would suffice to simply state that relocation and interim payment loans are exceptions," adding, "Rather than weighing pre- and post-redevelopment values ​​and imposing restrictions again, the clearest approach is to loosen the LTV standards.
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[email protected] Choi A-young, Seo Ji-yoon Reporter