Table of Contents
- 12 trillion won policy fund, fully operational
- Overview and structure of the Future City Fund
- Selection and role of the management company
- Criteria for evaluating management companies
- Implementation schedule and outlook
- Conclusion: A reliable source of funding for the maintenance projects of aged planned cities
- Frequently Asked Questions (FAQ)
12 trillion won policy fund, fully operational
The Ministry of Land, Infrastructure and Transport and the Housing and Urban Guarantee Corporation (HUG) are actively working to establish a Future City Fund with a scale of 12 trillion won.
This fund is designed as a large-scale policy fund to facilitate financial resources for the maintenance projects of aged planned cities like the first generation new towns. It aims to provide stable financial support needed in the early stages of the project.
In particular, the first fund of funds is planned to be 600 billion won and aims to be established within the first quarter of 2026.
Basic information on the Busan city's maintenance project for aged planned cities
Overview and structure of the Future City Fund
The Future City Fund is a loan-type fund that supports the financing needed for maintenance projects of aged planned cities, which secures interest income through HUG's AAA-rated guarantee. This structure plays a significant role in encouraging active participation from private investors.
This fund operates through a fund of funds and a private fund model. The fund of funds directly lends the initial project costs, supporting up to 20 billion won. Additionally, it plays a role in assisting the fundraising of the private fund. On the other hand, the private fund is separately constituted by project implementers through public offerings and executes loans required for the actual project areas.
In this way, project implementers can receive stable funding support, and it is expected that their financial negotiation power with constructors will increase, significantly improving the profitability of the overall project.
Selection and role of the management company
The selected management company will oversee the first fund of funds for the Future City Fund. This management company will be responsible for investor recruitment, establishing guidelines for the private fund operation, and executing the loan for project costs.
To participate as a management company, one must possess the qualifications as a collective investment operator specified in the Capital Market Act, and the selected company is expected to provide initial project cost loans for designated maintenance areas once the constructor is confirmed. Additionally, it will also perform the role of a catalyst for initial funding by purchasing some (10-20%) of the revenue securities issued by the private fund.
Criteria for evaluating management companies
When selecting a management company, both quantitative and qualitative evaluations are considered.
The quantitative evaluation mainly includes the asset size, years of operation, workforce status, stability, and transparency of the management company. For example, if the total net asset over the past three years averages over 6 trillion won, and the total net asset in real estate averages over 1 trillion won, it receives up to 10 points.
On the other hand, qualitative evaluations consider the understanding of policies, collaboration strategies, specialized strategies, operational expertise, and risk management abilities.
Moreover, to recruit investors, at least a letter of intent (LOI) for investments exceeding 600 billion won must be submitted, and submitting LOC (commitment letter) can earn additional points.
This signifies that the ability to operate the fund is not the only criterion, but also how effectively large-scale private capital can be attracted is crucial for evaluation.
Implementation schedule and outlook
The announcement for selecting the management company for the first fund of funds will be available from September 30 on the websites of HUG and the Korea Financial Investment Association. This bidding process will take place from October 13 to November 23, and the preferred negotiator is expected to be selected in December. Following this, the fund of funds is planned to be established within the first quarter of 2026.
The leading districts of the first generation new towns are currently submitting special maintenance plans to the municipal advisory committee, and the procedures are progressing swiftly. Therefore, the demand for the initial project cost loans is expected to arise in the first half of 2026.
The Ministry of Land, Infrastructure and Transport plans to reinforce administrative and financial support along with the timely establishment of the Future City Fund to ensure the planned commencement of 63,000 housing units by 2030. It is expected that this will facilitate smooth new urban development.
Conclusion: A reliable source of funding for the maintenance projects of aged planned cities
The Future City Fund, with a total scale of 12 trillion won, is establishing itself as an important policy tool for stable funding required for maintenance projects of aged planned cities. In particular, the establishment of the first fund of funds, with a scale of 600 billion won, is expected to contribute significantly to the reorganization projects of the first generation new towns.
The Ministry of Land, Infrastructure and Transport and HUG anticipate that this fund will address the issues of funding shortages in the early stages and attract private capital, thus enhancing the speed and efficiency of maintenance projects. This plan will serve as a cornerstone for the development of future cities.
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Frequently Asked Questions (FAQ)
Q. What is the Future City Fund and what is its purpose?
The Future City Fund is a loan-type policy fund aimed at supporting financing needed for the maintenance of aged planned cities, with a total scale of 12 trillion won.
The Future City Fund is a large-scale policy fund established by the Ministry of Land, Infrastructure and Transport and HUG to provide stable funding for the initial project costs needed for maintenance projects of aged planned cities like the first generation new towns. With a total scale of 12 trillion won, especially the first fund of funds aims to be established with 600 billion won within the first quarter of 2026. This fund encourages private investor participation based on HUG's AAA-rated guarantee, reducing financial risks in urban maintenance projects and allowing for smooth funding support.
Q. What is the structure of the Future City Fund?
It consists of a fund of funds and a private fund that support initial loans and loans for project areas.
The Future City Fund operates on two pillars: a fund of funds and a private fund. The fund of funds provides loans for initial project costs, supporting up to 20 billion won and assisting fundraising for the private fund. Conversely, the private fund is constituted by project implementers through public offerings and executes the loans necessary for the actual maintenance projects. This structure is expected to enable project implementers to secure stable funding and improve negotiation powers with constructors, significantly enhancing overall project profitability.
Q. What are the selection criteria and roles of the management company?
The management company is responsible for managing the Future City Fund's first fund of funds, recruiting investors, and executing loans, evaluated on asset size and expertise.
The management company will oversee the first fund of funds for the Future City Fund, responsible for investor recruitment, establishing guidelines for the private fund operation, and executing project cost loans. The selection criteria require holding qualifications as a collective investment operator as per the Capital Market Act, while quantitative evaluations encompass asset size, years of operation, and stability, with qualitative evaluations covering policy understanding, collaboration strategies, and risk management capabilities. Furthermore, submitting a letter of intent for investments exceeding 600 billion won and submitting an LOC (commitment letter) are also crucial evaluation elements.
Q. What is the implementation schedule and outlook for the Future City Fund?
The announcement for the management company selection will be made by the end of September, with bidding in November, and the fund of funds is expected to be established in the first quarter of 2026.
The announcement for the selection of management company is posted on September 30 on the websites of HUG and the Korea Financial Investment Association, with the bidding process occurring from October 13 to November 23. A preferred negotiator will be selected in December, and the first fund of funds is planned to be established within the first quarter of 2026. Currently, procedures for the leading districts of the first generation new towns are progressing rapidly such as submitting planning proposals, and initial demands for project cost loans are expected from the first half of 2026. The Ministry of Land, Infrastructure and Transport aims to push forward with the plan to commence 63,000 housing units by 2030 through the administrative and financial support of the Future City Fund.
Q. What are the expected effects of the Future City Fund on urban maintenance projects?
The fund addresses initial funding shortages and attracts private capital, improving the speed and efficiency of project progress.
The Future City Fund tackles the critical issue of funding shortages in the early stages of the maintenance projects for aged planned cities by ensuring stable funding sources. By actively attracting private capital, it reduces financial risks while enhancing negotiation power with constructors, leading to expected increases in overall project profitability. This will facilitate smooth execution of large-scale urban development projects, such as reorganization of the first generation new towns, and lay the groundwork for future city development.
