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Real estate stimulus plans in South Korea to boost flagging property markets

It has reduced the level of capital gains tax on land sales to between 6% and 35% for multiple property owners to bring them in line with those who own just one home.

Currently the owner of three or more properties has to pay a 45% capital gains tax when selling one of them. Companies that sell land unrelated to their business operations have been taxed up to 52% and individuals who sell land that is neither for living on nor tied to their business have been levied up to 60%.

The Ministry of Strategy and Finance did not say how much individuals and companies would benefit from the easing of the tax system, but the move comes as the ministry is working on additional budget spending plans to lift Asia's fourth-largest economy.

The ministry forecast last month the country's economy would contract by 2% this year, which would be the first annual contraction since the Asian financial crisis 11 years ago.

But moves to stimulate the real estate market seem to be working with Japanese firms showing considerable interest in investing. Japanese private equity fund Vana World is to invest approximately $1.9 billion in a free trade zone under development in South Korea's western port city of Incheon

The debt clearing agency, Korea Asset Management Corporation plans to buy 1.24 trillion won in property related loans from small savings banks to relieve them of soaring loan delinquencies and defaults.

The Bank of Korea has cut its policy interest rate by a total of 3.25% since early October, taking the rate to a record low of 2%.