Over the past several decades, real estate project financing (PF) has repeatedly triggered economic disturbances in Korea, with no fundamental remedies in sight until now. Project sponsors are at the heart of this issue, investing minimal equity while heavily relying on guarantees from third parties, such as construction firms, to push forward development projects entirely on debt. This financing structure is unheard of in major advanced countries. Korea needs to reform its unique PF structure by augmenting capital and reducing dependence on guarantees. - Over several decades, real estate project financing (PF) has repeatedly destabilized the Korean economy, but fundamental improvements have not been made. - The root cause of PF problems lies in the unique financing practice of relying almost entirely on debt, where developers invest very little equity and depend heavily on third-party guarantees. - In Korea, the equity ratio of developers is around 3%, while in major advanced countries, it exceeds 30%. - In major countries, land is secured with equity capital, and only construction costs are financed through loans. This approach prevents the issue of refinancing bridge loans into main PF loans, which is typical in Korea. - In major countries, it is rare for third parties, rather than developers, to guarantee PF loans, unlike in Korea. - The low-equity and highguarantee structure leads to more developers becoming smaller in scale and underfunded. - The low-equity and highguarantee structure leads to poorer assessments of project feasibility, no-questions-asked investments, and increased macroeconomic volatility. - The low-equity and highguarantee structure shifts all risks to the national economy, not developers. - Since advanced countries base loan issuance on project feasibility and financial structure per PF principles, capital augmentation is a prerequisite for developers to obtain loans. - However, when Korea introduced PF, the market consisted of small developers and large construction firms. This disparity led to a low-equity, high-guarantee structure, which was reinforced by the pre-sale system. - The prudent direction would be to raise the equity ratio to the level of advanced economies and abolish third-party guarantees. To that end, Korea should introduce regulations on capital augmentation. - While regulations to increase capital may constrain the quantity of housing supply, they are expected to improve its stability. - Even in environments unfavorable for scaling up, some developers have started small and grown into conglomerates, while others are affiliates of large corporations. - The pool of potential equity investors is not limited. - Because REITs socialize development profits and are already subject to equity ratio regulations, it is desirable to revitalize their equity investments or foster their direct participation as project sponsors. - During the transition, it is necessary to implement support policies that encourage capital increases. - The acute lack of data on real estate PF makes it difficult to even stay current, which in turn only allows temporary measures during crises and hinders regular monitoring or early crisis detection. - A database system should be set up to collect official statistics on financial and business information by project and company.