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.
BI policy to boost weak demand hinges on consumer, bank appetites
Change Size
Illustration of a housing complex. (Shutterstock/karelnoppe)
T
he latest move by Bank Indonesia (BI) to relax down-payment regulations to boost property and automotive sales will hinge on the appetites of consumers and banks, with the former facing much-reduced purchasing power as a result of the coronavirus pandemic.
BI Governor Perry Warjiyo announced on Thursday that the central bank would relax the regulations to allow zero percent down payments for both mortgages and automotive loans to boost demand in both sectors, which have been battered by the COVID-19-induced downturn.
The central bank has relaxed the loan-to-value (LTV) and financing-to-value (FTV) ratios, the ratios between the loan and the asset value, to 100 percent, from the previous 85 to 95 percent depending on property type. The LTV is an often-used ratio in mortgage lending to determine the size of down payment required and whether a lender will extend credit to a borrower. These relaxation policies are set to take effect starting from March to December this year.
However, Bahana Sekuritas economist Satria Sambijantoro said on Friday the central bank's policy to allow lower down payments for mortgages might not be in line with consumer needs. Consumers generally aim to pay a larger down payment for mortgages to reduce their outstanding loans in the future, for fear that interest rates could rise, he said.
"I doubt that relaxing the down payment rules can stimulate demand among buyers since they have concerns about large instalments and higher interest rates," Satria told The Jakarta Post in a phone interview, adding that consumers might have similar concerns regarding vehicle loans, which are also weighed down by a lack of appetite to buy vehicles because of reduced mobility during the pandemic.
Indonesia is aiming for economic recovery this year, after entering an economic recession last year for the first time since 1998, with the GDP dropping by 2.07 percent in 2020 as most economic components fell. Household spending fell 2.63 percent last year, which was also contributed by a fall in automotive sales.
Read also: Indonesian economy remains under stress as cases continue to climb
