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(LEAD) S. Korea to support builders, boost slumping housing markets
SEOUL, May 1 (Yonhap) -- South Korea plans to provide support to local builders and actively dispose of soured construction loans in a bid to boost the sluggish construction sector, government officials said Sunday.

   The government also said it will offer tax benefits on real estate investment trusts and funds to lure investments in a pile-up of unsold houses in an effort to boost housing market transactions.

   A set of steps were drawn up by collaboration with the land ministry, the finance ministry and the financial regulator.

   The move came as the prolongation of the slumping property markets and a rise in soured project-financing (PF) loans are feared to undercut the livelihoods of low and middle-income families, and have negative repercussions on the broader economy.

   "The slump in the construction markets and the subsequent shortage of the number of homes would aggravate job conditions and domestic demand as well as hurt the livelihoods of ordinary people," Land, Transport and Maritime Affair Minister Chung Jong-hwan told a press conference. "The government will continue to closely watch property market conditions."

   The government said it came up with the measures in a bid to create a soft landing for the construction sector through the disposal of soured PF loans and to revive the housing market by improving conditions for home supply.

   South Korea plans to urge local banks to roll over maturing PF loans for relatively sound developers and provide financial support to builders that are suffering from an acute cash shortage but have chances to revive.

   The country is considering setting up a "bad bank" using contributions from around eight local banks in June to buy non-performing property loans. The government is also mulling purchasing around 1 trillion won (US$935.5 million) in soured bad debt at 50-percent discounted prices.

   Local banks held 6.7 trillion won in distressed PF loans, and the rate of soured bank PF loans reached 18.01 percent as of end-March, up 1.57 percentage points from three months earlier.

   The South Korean economy regained strength, aided by exports, but its construction sector remains sluggish. In the first quarter, construction investment tumbled 6.7 percent from three months earlier, the worst performance in 13 years.

   Local builders have suffered from business setbacks as PF loans, which were taken out almost excessively from savings banks, riding on the 2005-2006 housing market boom, turned sour as the global financial turmoil took a heavy toll on the property markets.

   The government said it will ease transfer tax rules for single-home owners living in Seoul and its six adjacent areas whose home prices are below 900 million won. It also plans to expand the supply of houses by easing regulations on limits of land use.

   sooyeon@yna.co.kr
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