The growth of apartment development has led banks to facilitate apartment purchases through apartment loans (KPA), which are also slowly growing in number.
"However, compared to other countries, such as Singapore or the United States, here the number of KPA users is still small," Binakarya Propertindo Group director Go Hengky Setiawan said.
While in Indonesia only 50 percent of apartment purchases use KPA, in several other countries buyers have no choice but to use KPA, so it is not surprising that in Singapore apartment purchases using KPA reach about 90 percent.
"Consumers in other countries are interested in utilizing KPA and the related governments recommend it, so it is only natural the percentage of KPA is high," said Hengky.
Although the current commercial interest rate for KPA is only 12 percent per year, not many consumers use it, said Hengky, while for subsidized KPA the interest rate is lower at 9 percent. The loan duration varies, between 10 and 15 years. "Some loans have a duration of five years, while the terms and conditions are not complicated," said Hengky, who is also director of PT Agung Sedayu Propertindo.
Explaining why there is a small number of KPA customers in Indonesia, Hengky said that KPA remained less popular than house loans.
Previously, the vice presidential candidate of the Indonesian Democratic Party for Struggle (PDIP) in coalition with the Gerindra party, Prabowo Subianto, stated that should he be elected, he would instruct state banks not to provide KPA for luxury apartments. "I will instruct state banks not to help in the development of luxury apartments," said Prabowo.
Developers of luxury apartments, he further said, would have to arrange loans through private or foreign banks. Prabowo's stance was understandable considering the value of KPA for luxury apartments stands at Rp 19.8 trillion, which is for the construction of 3,800 luxury apartments. If that amount was converted to Direct Cash Aid it could help about 19 million poor households in the country. Consumers apply for KPA at the banks being used by individual developers so that the application process is easy.
Hengky said KPA had helped a lot of middle-class families purchase apartments, while previously only wealthy people could afford an apartment.
Generally, if a buyer does not occupy their apartment it is rented out and becomes a long-term investment.
However, the price of an apartment is usually higher than a landed house. A Rp 600 million house will produce a rental fee of between Rp 15 million and Rp 20 million per year.
The payment system is important before one decides to purchase an apartment. People who can afford to pay cash will have no problem, but others must consider the monthly income if a KPA is used. It is recommended that the installment payments of KPA should not exceed one-third of one's monthly income. Also, one has to prepare about 30 percent of the apartment price as a down payment.
Then, naturally, choose a bank that offers the lowest interest rate and provides good service. And, don't forget to inquire about other fees, such as administration and so forth.
Normally, banks are more interested in providing KPA for apartments ready for occupancy, so it is best to choose such apartments as their strata title are also included in the purchase.
Mostly two bedroom apartments are more popular than larger ones as their price increases by an average of 40 percent per year, while one-bedroom apartments increase about 15 percent and three bedroom 30 percent.
Banks that provide KPA include BCA, UOB Buana, OCBC NISP, Permata, BII, BNI, Mandiri, BTN, Danamon, BRI and CIMB NIAGA.
