MOLIT Expands Financial Support for Construction Sector

To assist the construction industry grappling with financial strain due to rising raw material costs and a shrinking project financing (PF) market, the Ministry of Land, Infrastructure and Transport (MOLIT) and major guarantee and financial institutions have launched a financial support package.

MOLIT announced on the 16th that it would provide special loans through the Construction Mutual Aid Association and the Specialty Construction Mutual Aid Association. The Construction Mutual Aid Association will supply funds up to 100 million won per member, while the Specialty Construction Mutual Aid Association will offer up to 500 million won, with interest rates set between the high 2% and low 3% range annually. Guarantee fee burdens have also been reduced. The Construction Mutual Aid Association will lower guarantee fees for members with lower credit ratings, while the Specialty Construction Mutual Aid Association will offer reduced fees to all its members. Discounts include 10% off for sub-contractor payment guarantees and construction equipment rental payment guarantees, and up to 30% off for contract and construction performance guarantees.

The Korea Housing & Urban Guarantee Corporation (HUG) and the Korea Housing Finance Corporation (HF) are also participating in the support. HUG will reduce fees for sales guarantees and urban redevelopment project loan guarantees by 30%, with a potential reduction of up to 60% if PF loan guarantees and sales guarantees are used concurrently. HF will lower its business guarantee premium rate by 30% and expand the supply scale of its 'Construction Cost Plus PF Guarantee' from 2.5 trillion won to 4 trillion won. The deadline for special guarantee extensions has also been pushed to the end of the year.

The construction industry views the simultaneous support from the government and related agencies as contributing to the alleviation of short-term liquidity crises.