Outstanding real estate project finance (PF) loans in South Korea rose for the first time in two and a half years, though delinquency rates topped 10% at mutual finance firms, signaling a rapid deterioration in asset quality.
PF loans outstanding stood at 115.8 trillion won ($81 billion) at the end of June, up 300 billion won from the end of March, the Financial Services Commission said on the 13th. It was the first quarterly increase since the end of 2023, when the balance was 135.6 trillion won. New PF lending in the second quarter rose 6.7 trillion won from the first quarter to 23.5 trillion won.
Total PF exposure, which includes PF loans, land-collateralized loans and debt guarantees, fell 1 trillion won from the end of March to 168.8 trillion won. The pace of decline slowed sharply, however, compared with the roughly 5 trillion won in quarterly reductions recorded since the end of 2023, when exposure totaled 231.1 trillion won.
The industry-wide delinquency rate on PF loans was 4.56% at the end of June, down 0.09 percentage point from the end of March. The improvement reflects the increase in new lending as well as efforts by financial firms to wind down troubled project sites.
Non-bank lenders moved in the opposite direction. The PF delinquency rate at mutual finance firms jumped 5.28 percentage points to 10.79% from 5.51% at the end of March. Over the same period, the rate rose to 5.27% from 4.91% at specialized credit finance companies, to 3.63% from 3.12% at savings banks and to 2.82% from 2.27% at insurers.
The FSC and other government agencies confirmed the same day that they will suspend minimum equity capital requirements for PF projects involving residential developments for two years, a step aimed at spurring housing supply.