Redeemable Housing Bonds are issued by a housing constructor who satisfies certain requirements of Housing Act only after it purchases the housing site. The housing constructor can issue Redeemable Housing Bonds at face value proportional to the whole sales amount of the houses that will be supplied to the buyers. The buyers of the redeemable housing bonds will pay the price of the redeemable housing bonds as a part of the house purchase amount before signing the contract for the sale in lots, and the issuer will redeem the bond with the houses that he will build on the site on which he issued the bonds. Therefore it is a kind of company bond, which contributed much to the financing of housing constructors in the First New Town Development Project since its introduction in 1977.
In this study, the institution itself, the status of issuance, the reasons why it was not much used in other projects, and the effects of this institution were researched based on the actual case in the First New Towns Project, as it is the only one case that utilized this institution actively since redeemable housing bonds was introduced in 1977.
Two reasons were identified as the reasons why the Redeemable Housing Bonds have not been actively used. One is the institutional regulations on the House Supply and Redeemable Housing Bonds and the other is the situation of housing finance market.
First, under the House Supply System that regulates to supply houses over 20 households to the ones who are entitled or qualified by the related laws, it was difficult to utilize under the situation that you can get capital interest if only you can buy a house even though the law restrict the qualification to purchase the Redeemable Housing Bonds to be the ones who are entitled to buy the houses, as only the ones who can finance can buy the houses easily.
Second, they did not utilize the regulations and restrictions such as approval of issuing plan and qualifications of issuers and issuing amount to regulate the issuance of the Redeemable Housing Bonds under such a house supply institution.
Third, there are issues in the housing finance market. The market did not feel it necessary to issue Redeemable Housing Bonds because of secure fund procurement through pre-sales of housing construction, diversified fund sources such as real estate investment trust and project finance, and low interest fund from the financial industry.
The effects of redeemable housing bonds were reviewed from the perspective of countermeasures against the effects of PF expansion on the pre-sales house construction under the current housing finance environments and with the expansion of PF according to the introduction of the post-sale of housing construction, and the expansion of selective rights of the prospective buyers.
The effects are as follows; First, with the introduction of post-sales scheme, PF is expected to be concentrated on the houses built on the profitable public housing sites. Comparatively less privileged small and medium housing constructors have no other choice than procure construction fund through pre-sales on private housing sites. As they build houses on the private housing sites which has less privileges than public housing sites they will have difficulties in funding through PF, which will reduce the house supplies. With the Redeemable Housing Bonds, we can prevent the reduction of the supply.
Second, we can prevent the incidents from the contingent liabilities of the constructors in case of credit crisis of financial institutes through the diversification of construction funding sources, considering the current PF environments that the project executor procure the fund through the joint surety of the constructors.
Finally, through the differentiation of supply between private houses and public houses, it could expand the selective rights of the prospective house buyers.
Regarding how to utilize redeemable housing bonds, the followings are proposed; differentiation of private house market by applying the house subscription system on the public houses, reduction of the restrictions and regulations on the issuance and transfer of redeemable housing bonds and improvement of the creditability of the endorsers.
First, we need to secure the fund procurement through the issuance of redeemable housing bonds in the privately supplied house market where the market mechanism is applied by dividing the house supply market as public market and private market. In this case, we need to prepare institutions to prevent the houses from being the object of speculation.
Second, we need to deregulate the approval of redeemable housing bonds, restrictions on the issuers' qualifications and limitation of the amount and leave it to the market. The profitability of the project will regulate the issuance size autonomously.
Third, we can reduce the expenses and increase the security of fund procurement of the small and medium sized housing constructors who have difficulties in funding through PF loan or company bond issuance by improving the creditability of the endorsers.