Bank Indonesia (BI) has eased loan requirements for the purchase of property, cars and motorcycles in a move designed to spur the country'€™s weak economy, which has been under pressure amid the decline in the country'€™s exports and domestic consumer spending.

Yati Kurniati, BI'€™s director of macroprudential policy, said on Wednesday that the revision was expected to boost the sale of houses, apartments, cars and motorcycles to get the economy on the move again.

'€œAs you know, the economy has been in a slowdown and that has impacted loan growth quite significantly,'€ she said, adding that increased purchases in the automotive and property sectors were expected to revive economic activities.

According to Yati, both the property and automotive sectors have significant roles in the cooling economy because leverage in either sector created a series of ripple effects. Indonesia'€™s economic growth rate slowed to 4.7 percent in the first quarter this year, its weakest annual pace since 2009.

The International Monetary Fund and the World Bank have also lowered their forecasts on Indonesia'€™s economic growth to 4.7 percent this year, down from 5.2 percent.

'€œProperty is heavily related to other sectors. A boost in property will create higher demand for raw materials, electrical equipment, furniture and many other goods,'€ she said. Property-related loans have indeed been impacted by the slower economy, as shown by the latest banking statistics.

The new policy, stipulated in PBI No. 17/10/PBI/2015, has raised the loan-to-value (LTV) ratios imposed on purchases of property, cars and motorcycles. The new LTV regulations, which revised similar regulations issued in 2012 and 2013, became effective as of June 18.

A higher LTV means lower down- payment requirements for purchasers. For example, first-home buyers for houses larger than 70 square meters are now required to pay only 20 percent of the property price as down payment, as opposed to 30 percent stipulated by previous regulations.

The purchases of second and third homes require 30 percent and 40 percent down payments, respectively, whereas before the down payment requirements were set higher at 40 percent and 50 percent.

Meanwhile, people wanting to buy motorcycles or cars can also do so with lower down payments. The down payment has now been fixed at 20 percent of the motorcycle price, lower than the previous 25 percent.

However, the revision is only applicable to banks with total gross non-performing loan (NPL) ratios of lower than 5 percent. In the property and automotive loan segments, their NPL ratios must also be lower than 5 percent.

Property sales amounted to
Rp 347.54 trillion (US$26.17 billion) as of April this year, rising by only 1.6 percent from December 2014, or 12.1 percent from the same period last year, in recent years annual growth has reached around 20 percent.

In the case of automotive sales, Yati said that BI viewed motorcycles and cars as major supports for various productive activities. As with property, however, automotive sales and related loans have also been on the downturn as economic growth has slowed.

According to data from the Association of Indonesian Automotive Manufacturers (Gaikindo) and the Indonesian Motorcycle Industry Association (AISI), domestic car sales fell 16.6 percent year-on-year (yoy) to 443,181 units in May, while motorcycle sales were down 24.7 percent yoy to 2.6 million units in the same month.

Meanwhile, loans related to vehicle ownership were flat at around Rp 123 trillion in April, the same figure recorded in December.

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