Seoul to offer low-interest loans of up to W2b to Moa Housing cooperatives

The Seoul Metropolitan Government will for the first time offer early-stage project loans to Moa Housing cooperatives struggling to secure funding, allowing each cooperative to borrow up to 2 billion won ($1.45 million) at an annual interest rate of 2.2 percent.

The city announced Thursday that the loan program will cover cooperatives engaged in street-block housing improvement projects as well as small-scale reconstruction and small-scale redevelopment. Eligible cooperatives are those that have received formation approval but have not yet obtained project implementation approval.

The loan ceiling is 2 billion won per zone, capped at 5 percent of total project costs, with an annual interest rate of 2.2 percent. The funds may be used for early-stage expenses such as cooperative operating costs, design fees, service fees and general assembly costs.

The program is the first of its kind introduced by the Seoul Metropolitan Government to ease the financial burden on small-scale housing improvement cooperatives in the early stages of their projects.

Previously, cooperatives pursuing street-block housing improvement projects could obtain early-stage loans through the Korea Housing and Urban Guarantee Corporation (HUG), but growing demand and a shortage of housing and urban fund resources had limited that support. Small-scale reconstruction and small-scale redevelopment cooperatives had no equivalent loan program and were required to raise early-stage funds on their own.

Cooperatives wishing to apply may submit an application and supporting documents to the urban improvement project division of the relevant district office from Sept. 7 to Sept. 28.

Applications will then go through district-level review, a loan screening by the Seoul Housing & Communities Corporation (SH) and final city approval, with loan recipients and amounts to be confirmed in October. Disbursements will be made through SH.

The loan term is three years from the date of initial disbursement. If a cooperative has not received project implementation approval within that period, the term may be extended in one-year increments with city approval, up to a maximum of seven years. Repayment is due in a lump sum at maturity, backed by a HUG loan guarantee certificate.

Zones that have already received early-stage loans through HUG are not eligible for duplicate support. Also excluded are zones where cooperative formation approval has been revoked, where litigation related to the cooperative's existence is ongoing, or where a private developer has been designated as a joint project operator, designated developer or project agent.

"We hope this loan program will help small-scale housing improvement cooperatives overcome the financial difficulties they face in the early stages of their projects amid the construction slump, and allow them to move forward smoothly," said Myeong No-jun, head of the Seoul Metropolitan Government's housing bureau. "We will continue to strengthen public support to invigorate small-scale housing improvement projects going forward."