Regulators weigh excluding residential officetel group loans from household lending caps

Financial authorities are considering excluding residential officetel group loans from the household lending volume targets imposed on financial institutions, following a similar exemption already granted for newly built apartments. The move comes in response to industry complaints that interim-payment loans for officetel units have been difficult to secure.

The Financial Services Commission is reviewing whether to remove residential officetel group loans from individual financial institutions' lending volume targets, according to financial authorities Sunday.

Last month, authorities decided to exclude housing-related group loans from each institution's household lending targets, but officetels — classified as quasi-housing under the Housing Act — were left out of that exemption.

"The reason we eased restrictions on housing group loans was ultimately to promote apartment supply," a financial authority official said. "Residential officetels are essentially the same in that they are spaces where people live."

The official added that authorities plan to look into industry reports that interim-payment loans for officetels have not been flowing smoothly, while noting that no specific direction has been decided yet.

Authorities believe the industry's request aligns with the Aug. 13 real estate measures, which focused on boosting housing supply.

At a recent household debt review meeting chaired by the Financial Services Commission, secondary financial sector representatives raised the issue, arguing that officetel group loans fall into a regulatory blind spot and should be included in the lending volume exemption.

As banks have expanded their handling of housing group loans through their nationwide branch networks, competition in the financial sector has intensified. Secondary lenders believe they can absorb demand for residential officetel group loans, an area where banks have shown comparatively less interest.

Large-scale residential officetel projects such as Mokdong Yunseul Xi have recently launched pre-sales and drawn market attention. But at some sites, banks' conservative lending practices have made it difficult to secure group loan approvals for officetel projects.

Mutual finance institutions in particular have been effectively shut out of residential officetel group lending. Loan volume targets for individual institutions have been capped as part of the broader push to tighten household debt management.

Mutual finance institutions halted group lending earlier this year under the government's tightened household debt management policy, but resumed it about six months later last month after volume-exemption incentives were introduced. However, the exemption applied only to group loans backed by residential housing collateral.

Net loan growth this year has been capped at 0 to 1 percent, partly due to last year's household lending performance, yet outstanding loan balances have risen as previously approved group loans have been drawn down. Financial authorities recently expanded volume targets to grant additional headroom, but industry participants say meaningful capacity remains limited.

"It seems demand for residential officetels is also rising because the apartment pre-sale market has been frozen," a secondary financial sector official said. "If the regulation is eased, it opens another channel for financial institutions to diversify their business."