JAKARTA: Indonesia’s central bank is considering loosening lending regulations to help stoke credit growth in Southeast Asia’s largest economy.
One possible measure is to let homeowners take out loans to purchase a second property “off the plan,” or one that is pre-construction, Bank Indonesia senior deputy governor Mirza Adityaswara said yesterday in an interview in Jakarta.
Another option is raising banks’ minimum loan-to-funding ratio from the current 78 percent.
The central bank plans to publish the adjustments to its macro-prudential lending rules next month, Adityaswara said.
“We may loosen the loan-to-value ratio instead, or do both,” along with the off-plan loan permission, he said.
Officials are seeking new ways to boost credit growth after a 75-basis point cut to the benchmark interest rate and a 150-basis point reduction in reserve-requirement ratios resulted only in a 22-basis point drop in the average lending rates as of last month.
Loans increased 8.7 percent in March year-on-year, well below the central bank’s 12 percent to 14 percent estimate for the year. Indonesia’s economy expanded less than forecast in the first quarter, at 4.92 percent.
“The new off-plan policy for second homes will be supportive to the market and boost loan growth,” said David Sumual, chief economist at PT Bank Central Asia in Jakarta. “Further loosening in macro-prudential policy is needed as the previous easing isn’t effective enough to support loan growth.”
Adityaswara said that Bank Indonesia would still maintain “a prudent policy,” with the authority pledging to keep non-performing loans at below 5 percent of total loans.
Given current regulations, buyers go to developers to pay in installments for pre-constructed second properties, Adityaswara said.
That means developers are acting as banks, and next month’s change will address that, he said.
The Jakarta Composite’s property index pared losses to 0.7 percent following Adityaswara’s comments, after falling as much as 0.9 percent earlier. Construction firm PT Jaya Real Property jumped as much as 4.3 percent.
“The news itself should be positive for property developers,” PT DBS Vickers Securities Indonesia research analyst Edward Ariadi Tanuwijaya said. “However, I don’t think it will address the issues surrounding the affordability, after home prices rose drastically in recent years.”
