Plan aims to improve liquidity of collateralized land

The government on Mar. 31 outlined its comprehensive package to encourage more transactions of collateralized land, suggesting that the public and private sector cooperate in purchasing and redeveloping 380 billion yen worth of real estate in fiscal 1997.

The plan, announced on the final day of fiscal 1996, is an attempt to better utilize existing methods to increase liquidity of collateralized land formerly held by such financial institutions as the now-defunct “jusen” housing loan corporations. By boosting the liquidity of the real estate and land transactions in general, government officials said they hope that financial institutions will step up efforts to write-off the remainder of their nonperforming loans.

Vice Finance Minister Tadashi Ogawa said he hopes that the plan will spur creation of specific ideas and proposals to use the the collateralized land. The package announced Mar. 31 calls for land at 900 locations nationwide, with a total book-value of 380 billion yen, to be purchased with the help of taxpayers’ money in fiscal 1997. Most of it would be used for public works projects.

Much of the land falling into this part of the scheme is now held by the Housing Loan Administration Corp., the Resolution and Collection Bank and the Cooperative Credit Purchasing Co. — all entities that have inherited collateralized land from loans gone sour. These organizations, holding roughly 10 trillion yen in collateralized land, according to the Finance Ministry, would make a list of potential land plots they see fit for the scheme.

The plan would utilize existing frameworks to channel the public funds, such as through issuance of local government bonds to finance land purchases for the public works projects. A variety of government subsidies programs and loans from quasi-governmental organizations such as the Japan Development Bank would also be used, according to the package.

The government cited examples of how the land might be used — welfare facilities for the elderly, disaster prevention facilities and projects to enhance telecommunications networks. Regulations in land purchases by the Organization for Promoting Urban Development, a body affiliated with the Construction Ministry, would be relaxed.