Indonesia's banking sector expects that House Ownership Credit (Kredit Pemilikan Rumah, abbreviated KPR) will grow strongly in 2016 as Indonesian people's purchasing power and consumer confidence is estimated to improve amid accelerated economic growth. The majority of home buyers in Indonesia use KPR from a financial institution to finance the purchase of a house. However, interest rates on KPR are high and therefore a burden for many property buyers (although the government provides subsidy for the low-income group that uses KPR to finance a first-time property purchase).
Anggoro Eko Cahyo, Head of Consumer Banking at Bank Negara Indonesia (BNI), said economic uncertainties have somewhat eased in 2016 and therefore consumer confidence in Indonesia is rising. This will make more people decide to purchase a house this year, implying - given that most house purchases in Indonesia use a credit scheme - banks will see growing House Ownership Credit (KPR).
In June 2015 the central bank of Indonesia (Bank Indonesia) tried to boost Indonesia's sluggish property sector by lowering the loan-to-value (LTV) ratio. Indonesia's lender of last resort lowered the down payment (DP) requirement for the purchase of a house by 10 percent to 30 percent of the value for conventional banking, while the DP was cut by 5 percent to 20 percent for a house purchase using Islamic finance. This move made it easier to purchase a house for Indonesians as they need less cash for the DP. However, it failed to boost the property sector due to the high level of persistent uncertainty in the Indonesian economy last year.
Now the economy is expected to accelerate from the 4.8 percentage point (y/y) GDP growth in 2015, Cahyo targets BNI's KPR to rise at least 10 percent (y/y) in 2016. Last year, BNI provided IDR 34.7 trillion (approx. USD $2.6 billion) in KPR, up 4 percent (y/y) from the preceding year.
In order to boost the company's KPR in 2016, BNI offers an attractive package this year: two years of KPR with a prime lending rate of 8.7 percent, followed by one year with a prime lending rate in the range of 9.7 - 10.7 percent. These rates are more attractive than those offered by other Indonesian banks (see table below).
Interest Rates House Ownership Credit (KPR) per December 2015:
|Bank Rakyat Indonesia (BRI)||10.25%|
|Bank Central Asia (BCA)||10.25%|
|Bank Negara Indonesia (BNI)||11.00%|
|Bank Cimb Niaga||11.50%|
|Bank Pan Indonesia (Panin)||12.61%|
|Bank Danamon Indonesia||12.25%|
|Bank Tabungan Negara (BTN)||11.50%|
|Bank Internasional Indonesia (BII)||10.75%|
Source: Bisnis Indonesia
Hery Gunardi, Director of Consumer Banking at Bank Mandiri, agreed with Cahyo. Gunardi sees Bank Mandiri's outstanding KPR growing in 2016 (particularly in the second half of the year) on the back of an improving macroeconomic context in Indonesia, Southeast Asia's largest economy. Bank Mandiri targets a 5-6 percent (y/y) growth of KPR in 2016. Last year, the bank's outstanding KPR reached IDR 26.8 trillion (approx. USD $2.0 billion), up 1.27 percent (y/y) from realization in the preceding year.
Consumer Credit Indonesia (in IDR trillion):
|House Ownership Credit (KPR)||268.8||302.9||326.3|
|Apartment Ownership Credit (KPA)||12.0||13.2||13.0|
|Shop-house Ownership Credit||25.0||26.0||26.6|
|Motor Ownership Credit||104.5||123.2||120.6|
Source: Bisnis Indonesia