T

he central bank'€™s policy of tightening the loan-to-value (LTV) for property purchases, introduced late last year, has made the country'€™s publicly listed property developers more pessimistic about sales this year, as buyers are now required to pay a strict minimum down payment.

Diversified real estate developer Pakuwon Jati and Ciputra Surya '€” a subsidiary of property giant the Ciputra Group '€” have achieved only 30 percent of their respective overall 2014 sales targets, as many people have put off buying property due to the stricter borrowing rule.

Pakuwon Jati expected an unchanged marketing sales figure from last year'€™s Rp 3.02 trillion (US$255.12 million), the company'€™s development director Ivy Wong said in a press briefing on Thursday. '€œThe current market conditions have made us set a flat target this year.'€

Bank Indonesia'€™s (BI) new LTV regulation requires a minimum down payment of 30 percent of the house value for first-time buyers; 40 percent of the value for the purchase of a second house; and 50 percent for additional houses. This rule applies to landed houses and apartments with floor space of more than 70 square meters.

The projected slowdown in the country'€™s property market following the implementation of the LTV rule was exacerbated by holdups in new property developments during this election year.

Pakuwon Jati had secured 30 percent of its targeted market sales as of May, according to Ivy, most of which was contributed by carried-over projects. The company has decided to wait until after the July 9 presidential election to launch new projects when, it is hoped, the economic and political situation will be more stable.

The developer plans to launch two projects in the third quarter of this year, namely the Grand Pakuwon township in Surabaya, East Java, and a condominium tower in South Jakarta.

Pakuwon Jati also said that fewer people were now buying properties with mortgage facilities from banks or non-banking financial institutions.

'€œPreviously, about 50 percent of our customers preferred housing loans to purchase our apartmets and houses. Following the introduction of the LTV regulation, that figure has dropped to 30 percent,'€ Ivy explained. '€œNow, the majority of our buyers are resorting to installments, purchasing their intended property only after construction is completed.'€

Meanwhile, Ciputra Surya has also noted a downturn in customers using housing loans as the preferred method of payment, leading the company to lag in meeting its marketing sales target. More than 50 percent of Ciputra Surya'€™s customers purchased their property using housing loans in 2012, but that figure dropped to 46.8 percent last year.

Ciputra Surya director Nanik Santoso said the declining figure reflected the drop in housing demand after the central bank'€™s policy came into effect. '€œIn the last three months of last year, no housing loans were granted. Housing loans used to be buyers'€™ preferred method to obtain property, but the current difficulty in accessing them has led customers to think twice and postpone their plans to buy.'€

This situation, she said, had led the company to set its marketing sales target at Rp 2.2 trillion this year, 31 percent lower year-on-year. As of May, Nanik said that only 30 percent of the target had been met.

'€œThe LTV regulation has certainly affected us as a housing provider. Our second-home buyers make up about 10 to 15 percent of our total number of customers, so we are facing a potential loss of income from them,'€ she added.