President Kim Sun-kyu of Korea Housing Guarantee Co., in a recent interview with NewsWorld, talked about the company’s grand plan to support the growth of the national economy by helping SMEs advance overseas as well as creating jobs in Korea. The CEO said he will steer the company to support the liquidity of construction companies in general amid the sluggish housing market. Particularly, his plan targets small homebuilders in such a way as to rekindle the sagging home sales market this year by guaranteeing repayment for allocated houses by allocation winners, especially those sold on the condition of repurchase.

Following are excerpts of the interview:

Question: What is the current status of Korea Housing Guarantee Co. and what was the rationale for the establishment of the company?

Answer: Korea Housing Guarantee Co. was set up under the Residential Housing Law to protect the residents and the suppliers of residential housing to spur the development of housing welfare in support of balanced progress in the national economy.

The company, with 3.232 trillion won in capital, has issued guarantees for 3.67 million housing allocation guarantees and repair guarantees for 2.88 million households totaling 543 trillion won, helping to build trust in residential housing construction companies in support of the government’s housing policies.

When a construction company goes bankrupt and cannot build houses, Korea Housing Guarantee will help the company continue to build houses on its guarantees or return the advance payment to the buyers of the houses being built and get their new houses repaired if needed.

The company has also been playing its public role of providing liquidity to the housing market to spur the housing trade due to the prolonged slump by guaranteeing project financing, buying unallocated houses, and C-CBO. 

Q: What would be your projection for the housing market in the days ahead as a real estate expert?

A:  I feel that the housing market will continue to drag due to the reduced demand based on various indicators including Kookmin Bank’s National House Purchase Index, which was 30.7, the lowest level since 2009, and the percentage of debts versus disposable income, which hit 172.3 percent, up from 166.9 percent in 2010 due to the financial crisis.

So housing builders will continue to suffer from the sluggish housing market in the days ahead due to reductions in the housing allocation and the doldrums in housing sales. It will take some time for home buyers to see their conditions improve. The long-term home leasing market will continue to be stable as rental fees rose high last year despite there being too many units in the leasing market.

Q: Your company has been engaged in the business of providing liquidity support to perk up the housing market. Can you elaborate on that business?

A: Korea Housing Guarantee Co. has been providing guarantees for project financing and the purchase of houses sold on repurchase conditions. Since the company’s launching of the project financing guarantee in 2005, the company’s issuances of such guarantees amounted to 2.4 trillion won as of the end of June, allowing 32,000 households to move into new houses at 52 housing construction sites around the country. The company had to issue the guarantees to support the construction firms’ liquidity, as banks were reluctant to provide any new loans to those companies to keep the housing supply at stable levels.

Since the company began buying houses on repurchase conditions to supply liquidity to homebuilders in November 2011, it has bought 16,000 houses at 85 home building sites for 2.5 trillion won. The deal not only prevented many homebuilders from going bankrupt, but also cut the amount of guarantee default by half, contributing to the stability of residential housing unit supply around the country.

Q:  Entering this year, the launch of new businesses has been rather brisk. Can you introduce to us new commodities in the area of purchasing homes by less well-off people?

A:  The company has been working on the development of new financial products to help low-income families own homes and, so far, we have been able to introduce four such products in the first half. They are the guarantees for funds to buy houses and guarantees for loans to lease houses, among others.

The Public Residential Fund and Guarantee for House Leasing Loans is for low-income families and workers  °™  the general public. The fund, especially, guarantees the repayment of loans for officetel leasing and has so far provided a total of 13.2 billion won to 341 low-income households with the support they needed to secure their leasing from the fund. The company has also introduced the Housing Purchase Fund Guarantee to guarantee the repayment of loans to pay for the new houses the buyers secured from the financial institutions to help people realize their dreams to own their own homes.

In addition, the company has been managing other guarantee services in the areas of remodeling, rebuilding, and redevelopment, such as the Guarantee for Maintenance Fund Loans, the Remodeling Fund Guarantee, and others, which also covers relocation expenses and other related expenses in those areas.

The company’s total guarantees issued in connection with the new guarantee products introduced this year amounted to 3.435 trillion won, showing the new products would do well in the future. The demand for guarantees has been rising this year due to the introduction of IFRS in financial statements and for the health of financial assets becoming a main concern in the financial industry.

With the paradigm for the residential house construction changing from construction to remodeling and redevelopment, the Maintenance Business Fund Loan Guarantee and the Remodeling Fund Guarantee and other similar facilities are being counted on to have huge growth in the future. The company will continue to renovate its guarantee systems in order to contribute to the improvement of housing welfare for the people by stabilizing the monthly and long-term home leasing markets by spurring the home leasing business both in the public and private sectors.

Q:  Your company has been making large contributions for the good of society. Can you please explain some of those activities?

A:   Korea Housing Guarantee Co. has been meeting its given social responsibility as a state-run firm and has been getting excellent reviews for its activities. The company won the citation from the Ministry of Patriots and Veterans Affairs for its role in improving housing conditions for the financially dislocated people and the Prime Minister’s citation as a state-run company that has done a great job in improving the residential welfare.

The company’s social works have largely been provided for low-income people to improve their residential conditions, including the participation in the One Village for One Company Campaign and the Love Farm Village Campaign, largely devoted to helping the economically dislocated people in regional societies. The strategic social contribution activities aim to improve the housing conditions for low-income families in connection with the company’s operational objectives to upgrade the residential welfare.

At the end of June over 10 billion won in total support funds were provided to homeless families and those decorated for national merit to secure money to lease homes; low-income families to secure the funds needed to rent houses and repair their old houses; support to build‘love habitats’; and for the repair and maintenance of social welfare facilities °™  altogether five major programs.

The company aims to carry on with its support for homebuilders to continue building and tightening the voluntary teamwork among the officers and staff of the company. The company will continue to provide support to the economically dislocated people to do its share as a state-run company.

Q:  What are your hopes and plans as the CEO of the housing guarantee company?

A:   First, it is to continue to provide support to homebuilders to contribute to the national economy, as the construction industry is one of the key industries for Korea. We plan to continue to develop the guarantee products to improve the support system for homebuilders.

Second, we plant to improve the quality of life for families by making sure their housing conditions remain stable and pleasant all the time by developing new products for residential welfare upgrade and for the protection of properties owned by those contracted to buy allocated houses. We also plan to work for the development of our products for the segment of society who need help and spur their uses and find means to discount the guarantee fees for the individual guarantee products by improving the system if necessary. At the same time, we will continue to fully meet our social responsibility as a state-run company to help low-income and poor families.