Property Business Is Still Growing Amid Rising Inflation

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The property business had been in “apparent death mode” for 2 years due to the Covid-19 pandemic in Indonesia. After the pandemic was slowly brought under control, the property sector found its stage again. This revival is due to the very high demand for housing and increasing purchasing power in Indonesia.

CORE Indonesia economist Piter Abdullah said that the main pusher of the property business was purchasing power driven by an increase in the gross domestic product (GDP).

“In the short term, there is the challenge of rising inflation that can make people buy property, but this is only temporary because the need for housing in Indonesia is very large,” he said, Sunday (3/7/2022).

According to him, the ratio of housing loans (KPR) to GDP in Indonesia is still at the level of 3%. This ratio is still far behind Singapore (45%, Malaysia (38%), and Thailand (22). In fact, Indonesia also lags behind the Philippines, which has a mortgage-to-GDP ratio of 4%.

Next, from the demand side, data from the Ministry of PUPR reveals that the backlog of home ownership in Indonesia has reached 11.4 million units.

Of this amount, 7.6 million is the backlog of home occupancy. This is added to data from the Central Statistics Agency (BPS) in 2020 which states that only 59.5% of families live in decent houses.

According to Piter, the data backlog can continue to grow every year, due to the emergence of new families who need a house. Based on BPS data, there are as many as 1.8 million marriages every year.

In addition, housing demand is also driven by the investment motive of the growing middle class. In 2025, it is projected that there will be an increase of 77 million middle-class people in Indonesia. ‚ÄúThese data show that the demand for housing will continue to increase. The potential of the property industry must be the focus of the government and related stakeholders,” he said.

According to Piter, the government’s focus on the property sector will provide various benefits, ranging from resolving or eroding the housing backlog, increasing the property industry, and ultimately having an impact on economic growth or gross domestic product.

“Jokowi’s one million houses program is good, now we need support for sectors that support property, such as banking which focuses on property,” he said.

One thing that can be done, he said, is to support capital from the State Savings Bank (BTN), a bank that focuses on property. This is because property loans are generally long-term, requiring large capital to support the capital adequacy ratio (CAR).
Furthermore, in reducing the housing backlog, the government also provides liquidity assistance to banks through the Housing Financing Liquidity Facility (FLPP) program to finance subsidized housing.

With this program, the government provides liquidity assistance in subsidized housing mortgages of 75% and the remaining 25% comes from bank third-party funds (DPK). This year, the government provides an FLPP quota of 200,000 units or Rp. 28 trillion. This is an increase from the realization in 2021 which reached 178,728 units.