By Cynthia Kim

SEOUL (Reuters) – South Korea tightened mortgage rules for Seoul on Sunday, unveiling plans to tackle a housing shortage in the capital by adding more affordable homes than previously planned, leveraging land owned by state developers.

The loan-to-value (LTV) ratio for wealthy parts of Seoul, including the areas of Gangnam and Yongsan, will be tightened to 40% of the property’s value from Monday, against 50% now.

South Korea has complex borrowing rules for households, especially on mortgage loans, which are linked to income as well as the value and locations of homes.

> “As concerns about an upswing in home prices remain latent in the metropolitan area, we need extraordinary measures to stimulate supply while also controlling demand,” the government said in a statement.

South Korea plans to step up the use of land owned by state-run companies, including the Korea Land & Housing Corporation, for development, while streamlining rules for the knockdown-and-rebuild of apartments to tackle its housing shortage.