The South Korean government will introduce an investment pool of up to 2 trillion won ($1.77 billion), using house rental deposits to ease the housing cost burden for those who have to switch to a monthly wolse rental home from a lump-sum jeonse rental home.

The investment aims to deliver a fixed rate return of 2.5 percent a year, according to the Financial Services Commission on Thursday. The commission expects to begin fund raising early next year after all legal procedures are completed and a contract asset manager is selected.

In the Korean housing rental market, a long-term renting system called jeonse that allows tenants to borrow home for at least two years by paying a large lump-sum deposit have remained a popular leasing form, but more landlords seeking higher profits in a low interest environment have been lately opting are opting for monthly leasing, called wolse in Korea, adding financial burden to people without home.

Up to 200 million won can be invested per household and the investment period is at least four years. The fund worth as much as 2 trillion won will be under the management of Korea Securities Finance Corporation.

People whose rental home is valued at more than 900 million won or whose annual financial income exceeds 20 million won are not eligible to invest in the fund.

When the investment is cashed out before maturity, part of investment income will be subtracted as fees for asset operation.

The investment will go into enterprise type rental homes led by the Ministry of Land, Infrastructure and Transport.

Investment income will be paid to investors every quarter, but principal is not guaranteed.

A commission official expects about 385,000 people will subscribe to the investment pool.

By Choi Jae-won

[ⓒ Pulse by Maeil Business News Korea & mk.co.kr, All rights reserved]