Lee Yeon-woo is a financial journalist at The Korea Times. Her wide range of reporting includes policies, macroeconomics, stock market, companies and even crypto. She is passionate about connecting the dots in Korean finance and making it easier for foreign nationals to understand. Based on her previous experience as a national reporter, she also has a keen interest in social issues within the sector, including gender equality and ESG. Your tips and insights are always appreciated. You can send them to yanu@koreatimes.co.kr.
Real estate companies seek funding from foreign private lenders as banks tighten loan standards
Workers rest at a construction site in Seoul, Aug. 11. Yonhap
By Lee Yeon-woo
Real estate companies in Korea are increasingly seeking financing from global asset managers and alternative lenders as domestic banks scale back lending to riskier businesses to beef up their financial soundness, industry officials said Friday.
"The current market dislocation, marked by high levels of domestic corporate debts, challenges facing local lenders and subdued real estate sentiment, has opened a strategic window for foreign private credit investors," said Matthew Sohn, CEO of CapitaLand Investment Korea.
Private credit is a lending structure involving privately negotiated loans between borrowers and non-bank lenders. It offers faster execution and more flexible terms than traditional bank financing.
"In addition to development funding, investors are drawn to other credit tools such as loan refinancing and capital structure optimization," Sohn added.
The shift comes as Korea’s real estate market continues to falter. Weak buyer demand, a glut of unsold apartment units and surging construction costs have deepened the slump.
While Korean banks have historically dominated corporate and property lending, the rise in defaults has made banks more cautious, tightening loan standards.
Delinquent loans to the construction sector held by Korea’s five major banks reached 230.2 billion won ($165.7 million) in the first half of 2025, more than double the amount at the end of 2024.
Troubled loans in the broader real estate sector, including sales, leasing and development, are also rising steadily. They hit 621.1 billion won as of this June, up from 419.3 billion won in June 2024 and 572.7 billion won at the end of 2024.
Despite growing financial strain in the sector, demand for commercial property in Korea is expected to remain steady. According to real estate firm CBRE, its transaction volumes in 2025 are projected to match or even exceed those of the previous year.
Companies in the real estate sector are turning to alternative lenders to fill the gap.
One such lender is CapitaLand Investment, which launched a 180 billion won private credit fund here in February 2025. The fund targets construction loans and mortgage-backed financing across asset classes like data centers, offices, lodging and residential projects.
In October 2024, ESR, one of the Asia-Pacific region’s largest real estate asset managers, raised a $325 million private credit fund focused on Korean real estate.
Hong Kong-based investment firm SC Lowy also entered the market in September 2024, and drew attention after the Abu Dhabi Investment Authority (ADIA) joined as a cornerstone investor of its real estate credit fund.
"This kind of project-specific lending by an alternative fund was virtually unheard of in Korea a few years ago," said ALFA Group, an advisory firm based in Hong Kong. "Now, with institutions like ADIA committing capital to Korean private credit strategies, the market is set to deepen."
Between 2020 and 2024, $11.2 billion was raised for real estate private credit strategies across the Asia-Pacific region, representing a 42 percent increase from the previous five-year period, according to CLI Group. Korea accounted for $1.2 billion, or 10 percent of the total.