Jokowi Unveils VAT Exemption Incentives for Housing, Boosting the Indonesian Economy

property sector
property sector

The government’s relentless pursuit of stimulating the domestic economy takes another step forward. In a bid to bolster economic growth, President Joko Widodo, popularly known as Jokowi, is set to unveil a package of incentives geared toward the housing sector. One of the pivotal measures on the table is the government’s commitment to absorbing the Value Added Tax (VAT) for real estate transactions.

During the BNI Investor Daily Summit 2023 held at the tranquil Hutan Kota by Plataran in Jakarta on Tuesday, October 24th, 2023, President Jokowi announced the government’s intentions.

“We are in the process of crafting incentives for the real estate and housing sectors to sustain our economic momentum. As part of this, we are actively considering absorbing the VAT to alleviate the financial burden on property transactions,” he stated. This initiative marks a noteworthy intervention in the property market, aimed at fostering economic growth.

Furthermore, the administration is committed to aiding low-income community housing (MBR) by eliminating administrative fees. President Jokowi elaborated on this move during the same event, “For MBR housing, the government will provide assistance to waive the Rp 4 million administrative fee. This strategic step is not only a boon for aspiring homeowners but also a proactive measure to stimulate our national economy.”

The implications of these initiatives are profound. Previously, the government had set price limits for VAT exemptions on landed houses, with the maximum price range being stipulated between Rp 162 million and Rp 234 million for the year 2023, and a slight increase to Rp 166 million to Rp 240 million for the upcoming year 2024 in different zones.

These steps highlight the government’s commitment to ensuring that every citizen, regardless of their income level, has access to affordable housing.

“Since the inception of the Housing Financing Liquidity Facility in 2010, over two million low-income citizens have been able to realize their dream of homeownership through subsidized housing. The renewal of the PPN Exemption Facility underscores the government’s dedication to extending the benefits of subsidized housing to even more individuals, allowing them to purchase decent homes within their means,” explained Febrio Kacaribu, the head of the Fiscal Policy Agency at the Ministry of Finance.

This extension of VAT exemptions has been outlined in the Regulation of the Minister of Finance (PMK) 60/PMK.010/2023, a step taken to bolster housing availability, increase access to financing for the low-income segment of society, maintain the affordability of quality housing, and ensure the long-term sustainability of government programs and fiscal policies.

Febrio further emphasized the scope of this policy, stating, “The PPN exemption facility is designed to facilitate the provision of at least 230,000 housing units for low-income communities, aligning perfectly with the government’s set targets.”

In addition to the direct benefits for citizens, the VAT exemption facility has broader positive repercussions for the national economy. It is expected to invigorate the property sector and its ancillary industries, stimulate job creation, and contribute to increased consumer spending. This multi-pronged approach to stimulate economic growth is a testament to the government’s dedication to ensuring a prosperous and inclusive future for all Indonesians.