TheJakartaPost

Please Update your browser

Your browser is out of date, and may not be compatible with our website. A list of the most popular web browsers can be found below.
Just click on the icons to get to the download page.

Jakarta Post

Indonesia determined to develop secondary mortgage market

I can expand on it: Bank Indonesia Governor Boediono (left) responds to journalists’ questions, witnessed by State Minister for Public Housing Yusuf Asy’ari (with hat) after the signing of a joint ministerial decree on the formation of a coordinating team on the expansion of financing for the housing sector, at the BI complex on Thursday

Aditya Suharmoko (The Jakarta Post)
JAKARTA
Fri, February 13, 2009

Share This Article

Change Size

Indonesia determined to develop secondary mortgage market

I can expand on it: Bank Indonesia Governor Boediono (left) responds to journalists’ questions, witnessed by State Minister for Public Housing Yusuf Asy’ari (with hat) after the signing of a joint ministerial decree on the formation of a coordinating team on the expansion of financing for the housing sector, at the BI complex on Thursday. (JP/Ricky Yudhistira)

To help provide decent housing to low-income people and develop the secondary mortgage market, the government and the central bank signed Thursday a joint decree to boost house financing through the sales of mortgage-backed securities.

The decree, which is signed by the Finance Ministry, the office of state minister for people’s housing and Bank Indonesia (BI), will allow banks to get quick funds from selling their mortgage claims.

State-sanctioned PT Sarana Multgriya Finansial will act as a secondary mortgage facility. With that, banks can get their money back faster, and disburse loans quicker to  people wanting to buy their house.

Under the decree, a team headed by Finance Minister Sri Mulyani Indrawati will oversee the government’s house financing policy. No details as yet have been revealed.

State Minister for People’s Housing M. Yusuf Asy’ari said the sales of mortgage-backed securities would eventually help people to get low-cost apartments.

“Many of our households haven’t lived in a decent house. The team is expected to accelerate house financing in the future,” he said.

So far, Bank BTN is perhaps the only one to give out loans for the purchases of low-cost apartments.

“The government’s total subsidy for low-cost apartments is only Rp 2.5 trillion, while we need between Rp 13 trillion and Rp 15 trillion. We expect there will be other banks besides BTN,” Asy’ari said.

Mulyani said mortgage-backed securities would help make housing sector finance more liquid.

“It will help people to get financing, and developers will get an acceptable return.”

However, she added, the team would look at the capabilities of banks and financial institutions before securitizing mortgage loans.

Mortgage-backed securities have brought down the US economy, triggering a worldwide crisis, with the securities being repackaged again and again, with questionable value in relation to  underlying assets.

BI governor Boediono said the central bank would prevent similar  conditions arising in Indonesia.

“We’ll use only prime assets. And the securitization of the assets would be in just one phase, minimizing the risks,” he said.

According to BI, as of December last year, the banks have disbursed Rp 28 trillion in loans for real estate, Rp 48 trillion for construction and Rp 122 trillion for mortgages.

Boediono said the team had not selected which loans would be used as mortgage-backed securities, but hinted that it would probably be the mortgage loans.

BI deputy governor Muliaman D. Hadad said if banks standardized their loan requirements, then the securitizing of mortgage loans would be easier.

“Now it is not standardized. The underlying assets should be fixed.”

BTN has recently issued mortgage-backed securities, the first in the country.

On Thursday, the bank listed the securities at the Indonesia Stock Exchange in two tranches: Tranche A worth Rp 100 billion and tranche B worth Rp 11 billion.

Only tranche A  can be bought by individual investors and are being traded at Rp 1 per unit to attract  retail customers. Tranche B is being reserved for institutional investors.  

BTN plans to issue another Rp 400 billion of mortgage-backed securities later this year.

{

Your Opinion Matters

Share your experiences, suggestions, and any issues you've encountered on The Jakarta Post. We're here to listen.

Enter at least 30 characters
0 / 30

Thank You

Thank you for sharing your thoughts. We appreciate your feedback.