BI: The amount of House Down Payment Depends on the Bank

By : Herry Barus And Aldi Firhand. A | Saturday, June 30 2018 - 22:52 IWST

Residence Illustration
Residence Illustration

INDUSTRY.co.id - Jakarta- Bank Indonesia declares the amount of advance payment for the first house with an area above 70 square meters depending on the risk assessment by the bank post-exemption of the loan to value ratio (loan to value / LTV) of the house.

Deputy Governor of BI Erwin Rijanto told a press conference in Jakarta on Friday (29/6/2018) saying the LTV's release for the first house was to loosen the first home buyer's burden.

He said with the first LTV home release, the bank will assess the amount of down payment that customers must pay.

So, he continued, the bank could have put a zero percent down payment or on the contrary that is higher than the previous down payment rules.

"We are giving the first time buyer a" first time buyer "rule, but this is not a zero percent down payment." We submit it to the bank's management, "Erwin said.

In addition to making it easy for first home buyers, LTV easing will also boost home purchases for investment.

Prior to the revision of the LTV regulations, BI set the first-stage home purchase credit of more than 70 square meters is a maximum of 85 percent of the total house price or means a minimum down payment of 15 percent.

The revised regulation rules of LTV come into effect August 1, 2018.

In detail in this easing, BI waived the minimum down payment terms for the first house of all types. While the second house LTV and so on are set 80-85 percent, which means a down payment of 15-20 percent.

As for the type house under 21 square meters be it the first house and so on, free provision of minimum down payment.

Erwin also said not all banks can take advantage of the LTV release for this first phase house.

Banks that can enjoy this LTV relief is a bank with a non-performing loan ratio of net credit less than five percent (net). In addition, the non-performing loans for the property sector of the bank should also be less than five percent.

"For the first house we do not set the LTV ratio, of course, each bank is set according to existing risk management practices, we affirm that there are some prudential requirements that accompany this LTV realization," he said.

The Risk of LTV Exemption Although the bank may release the down payment, BI Governor Perry Warjiyo believes this easing will not harm the economy, particularly the banking sector with the rise in the NPL ratio.

The reason, said Perry, currently segment of people who can enjoy LTV is a community with age group 36 years to 40 years. The community group, Perry said, still has high purchasing power and paying ability.

"The 'Debt service ratio' (DSR) or the ability to repay the debt for the younger middle group reaches 13 percent-14 percent," he said.

In addition to allowing a down payment of zero percent, BI also relaxed the number of credit facilities through pivot into five home purchase facilities and also facilitated credit disbursement on a pivot basis.

This LTV leeway, Perry said, to increase the first home purchase as well as a second home for investment. He also confirmed that this LTV leeway would not make the property sector price more bubble.

"We are confident here with credit growth still around eight percent, and the current 5.1-5.2 percent economic growth, the bubble risks we see very small," Perry said.

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