Property developers in Indonesia celebrate relaxed mortgage rules
Property developers in Indonesia celebrate relaxed mortgage rules
Developers and construction players cheer on lessened restrictions
Indonesia’s central bank has announced a loosening up of mortgage lending rules in a bid to defibrillate a sluggish economy and boost credit growth.
Bank Indonesia (BI) will cut current down payment requirements for mortgages by 5 percent. Starting August, Indonesian homebuyers may require a downpayment as little 15 percent, 20 percent or 25 percent.
BI will also allow commercial institutions to issue mortgages for residential properties that are still in construction.
Earlier this month, BI had chopped the benchmark rate by 25 basis points to 6.50 percent and its seven-day repo rate to 5.25 percent. This marks the fourth time BI cut rates this year, defying expectations it would hold out on sweeping changes in anticipation of the UK referendum on the European Union.
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BI’s policy change was largely contingent on the Federal Reserve’s slow pace at raising interest rates, which has eased anxieties about capital outflows.
The new mortgage rules will take into account the size of the property and whether this is the homebuyer’s first, second, or third purchase. First-time homebuyers will soon be able to take out mortgage loans for as much as 85 percent of the property value.
Current loan-to-value ratios are restricted to 80 percent for first-time buyers.
Some sectors have responded well to the less restrictive regulations. Barron’s Asia noted that the Jakarta Construction Property and Real Estate index surged 5 percent this month after the announcement.
In response to the new rules, property developer Metropolitan Land raised their sales target to IDR1.43 trillion (USD110 million), Jakarta Globe reported.
In another move widely seen to spur liquidity in the property market, the Indonesian government will implement a tax amnesty law that may repatriate IDR560 trillion (USD42 billion) to the archipelago.
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Source: Property Report