An Indonesian mortgage tech start-up has secured US$3.5 million in funding from domestic and foreign venture capital firms.

The seed investment was co-led by Indonesia’s East Ventures and United States-based Crestone Venture Capital, as announced in a press statement released by the start-up on Wednesday.

US-based 500 Global, Indonesia’s VC Teja Ventures, Orvel Ventures, Hustle Fund and others participated in the early-stage funding round.

“With the strong track record, we believe [Ringkas’] innovative solutions will enable a more convenient and efficient process of home ownership for millions of Indonesians,” said East Ventures partner Avina Sugiarto, as per the press statement.

After securing this funding, Ringkas cofounder Ilya Kravtsov said the company was aiming to channel $200 million worth of mortgage transactions through the platform within one year.

"This latest funding round will also accelerate the adoption of Ringkas technology in unserved regions throughout Indonesia," he said, adding that the start-up was looking to launch more than 100 projects in 34 cities of the archipelago.

Ringkas offers services in a field called mortgage tech, which utilizes digital technology in an effort to make mortgage lending more efficient or accessible by simplifying processes and helping banks assess clients’ credit worthiness.

Most mortgage tech services revolve around two core activities, namely brokerage and financing. To execute them, mortgage tech start-ups often partner with banks and property developers.

Seventy-four percent of property buyers in Indonesia rely on mortgages for financing, another 17 percent pay in cash instalments and the rest make one-time cash payments, according to a Bank Indonesia (BI) survey conducted in the third quarter of last year.

Read also: Mortgage tech is taking up the property market, promising efficiency

Though it has become the main method of purchasing property, national mortgage penetration is still very low at only 3.25 percent of GDP in 2022, according to data from state-owned mortgage lender Bank Tabungan Negara (BTN).

BTN has also revealed that Indonesia faced a housing backlog of over 12.75 million units as of 2022, which was up from 12.7 million in 2021 and 11.4 million in 2015.

Ringkas was founded by Kravtsov, Leroy Pinto, Puguh Widyoko and Yoko Simon in early 2022 and has since secured more than $2 billion worth of housing supply by partnering with property developers, according to the statement.

On the bank’s side, Ringkas revealed that it was partnering with publicly listed Bank Central Asia (BCA), state-owned Bank Mandiri and Bank Rakyat Indonesia as well as several other publicly listed banks, such as Bank Permata, Bank Danamon and Bank UOB Indonesia.

The seed funding comes amid an investment slowdown in the domestic construction sector that might drag down Indonesia’s GDP growth in 2023, BI said last week.

Read also: GDP beats estimates as growth holds above 5 percent

Construction made up the lion’s share of investment in Indonesia’s GDP calculation, accounting for more than 70 percent of the total.

Meanwhile, investment generates 30 percent of national economic output, meaning construction investment is responsible for around 20 to 25 percent of the country’s GDP.