KHFC certificate of guarantee to reduce burden of joint liability faced by construction companies

Expected to reduce constructors＇ burden of joint liability following introduction of IFRS 

On February 7, 2011, the Korea Housing Finance Corporation (KHFC, CEO Joo-jae Lim) announced that construction companies signing a ″bank, construction company, and KHFC" tripartite agreement can use KHFC＇s certificate of guarantee in place of their joint liability for apartment installment payment loans that banks give to apartment buyers. The measure is designed to reduce constructors＇ burden of joint liability following the introduction of the International Financial Reporting Standards (IFRS). 

″Under the IFRS system, financial guarantees must be accounted for as liabilities, and this will result in an increased burden of liabilities for construction companies″ said a KHFC official. ″The new measure is expected to be a win-win for all interested parties. Homebuilders subject to IFRS can increase their financial soundness by resolving the issue of a rising share of liabilities, while banks＇ reserve burden will be lowered using KHFC guarantees.″

Meanwhile, to promote sales in the housing market, KHFC extended the time by which group guarantees must be applied for by builders: instead of applying no later than two months prior to the move-in date, builders can now apply by the move-in date. If builders are allowed to apply for an installment payment guarantee by the move-in date, individual home buyers will have the time to apply for and receive a guarantee until they register for ownership.