Seoul: Outstanding loans extended to risky real estate development projects dropped sharply last year via sell-offs or recapitalization, the financial watchdog announced Sunday.

According to Yonhap News Agency, the Financial Supervisory Service (FSS) reported that 14.7 trillion won (US$9.74 billion) in loans extended to real estate projects were classified as risky at the end of last year. This figure represents a decline from 18.2 trillion won at the end of September, 20.8 trillion won at the end of June, and 21.9 trillion won as of end-March.

The end-December figure accounted for 8.4 percent of total exposure by financial institutions to real estate development, which stood at 174.3 trillion won. This also marks a reduction from 11.5 percent at the end of March last year, when the total exposure was 190.8 trillion won.

The financial watchdog added that the remaining risky project financing (PF) loans will undergo restructuring. PF loans have been a persistent issue in the financial market due to a rise in soured loans, which began in late 2023 and posed a threat to financial institutions and overall market stability.