Galapagos Syndrome in South Korea's Real Estate PF, and the need for fundamental structural reform

Sunjoo Hwang

No 134, KDI Focus from Korea Development Institute (KDI)

Abstract: Over the past several decades, real estate project financing (PF) has repeatedly triggered economic disturbances in Korea, with no fundamental remedies in sight until now. Project sponsors are at the heart of this issue, investing minimal equity while heavily relying on guarantees from third parties, such as construction firms, to push forward development projects entirely on debt. This financing structure is unheard of in major advanced countries. Korea needs to reform its unique PF structure by augmenting capital and reducing dependence on guarantees.

Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:kdifoc:308155

DOI: 10.22740/kdi.focus.e.2024.134

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