An interest subsidy that previously covered only project financing for public redevelopment will be extended to cover relocation loans taken out by residents. The Ministry of Land, Infrastructure and Transport expects a single-homeowner who borrows the 300 million won basic relocation allowance at an annual rate of 4.8% to save about 6 million won a year in interest payments.
The ministry said on the 1st that it had revised its memorandum of understanding on interest subsidies for public redevelopment projects with the Korea Housing & Urban Guaranty Corporation (HUG), the Korea Land & Housing Corporation (LH), the Seoul Housing & Urban Development Corporation (SH) and the Gyeonggi Housing & Urban Development Corporation (GH). The revision expands both the list of eligible project sites and the range of costs covered, now including relocation expenses. The move follows up on the "rapid housing supply plan" announced on Aug. 13.
The interest subsidy program for public redevelopment uses the Housing and Urban Fund to cover part of the interest on project financing. Since the four agencies signed the memorandum in May 2023, it has been applied to project loans at 35 sites. The program covers the portion of the loan rate above 1.8%, up to a maximum of 2 percentage points.
Under the revision, new sites will also become eligible, including three locations recently added as candidate sites for public redevelopment, on top of the 35 already covered.
The subsidy, previously limited to project costs, will now extend to relocation loans. Eligible borrowers are single-homeowners who take out such loans to move elsewhere or to return rental deposits to tenants. Loans to owners of multiple homes are excluded, in keeping with the program's purpose of easing the burden on residents who actually live in the homes.
The subsidy applies to basic relocation loans of up to 300 million won, capped at 70% of the jeonse (a Korean lease system requiring a large lump-sum deposit instead of monthly rent) or other deposit held by each rights holder. Loans from all financial institutions that handle HUG loan guarantees qualify, including commercial banks, regional banks, the Korea Development Bank, Nonghyup and Suhyup. The subsidy runs from the time the loan is drawn down until the end of the 60-day designated move-in period.
The ministry's savings estimate assumes a loan rate of 4.8%. Applying the 2-percentage-point cap to the 3.0 percentage points above the 1.8% threshold yields 2% of 300 million won, or 6 million won a year. If three years pass between relocation and move-in, the total comes to about 18 million won.
"This revision to the agreement lays the groundwork for residents in public redevelopment areas to relocate with a lighter interest burden," said Yoon Young-joong, director general for housing redevelopment policy at the ministry. "We will continue working with related agencies to speed up public redevelopment projects so that housing supply in urban centers can materialize sooner."
Details on applying for the relocation loan subsidy are available from the developer of each project site — LH, SH or GH.
