High Property Credit Growth, Especially KPR
The Home Ownership Credit (KPR) has demonstrated significant growth, reaching 14.2 percent in July 2024, an increase from 12.6 percent in January 2024. In contrast, the credit for motor vehicle ownership continues to grow at a sluggish pace, remaining below 10 percent.
According to a report from Kontan.id, this KPR growth is largely attributed to the government's incentive of a 100 percent VAT exemption implemented since November 2023. The distribution of KPR for homes with a size of 70 square meters and above has seen the most notable increase, rising to 19.68 percent in July, compared to 10 percent in June 2024, 19.66 percent in May, and 23.79 percent in April.
This trend is understandable, as the 100 percent VAT discount on upper-middle-class homes significantly impacts selling prices. For instance, a house priced at Rp1 billion benefits from a VAT discount of Rp110 million, given the current VAT rate of 11 percent.
Analysts had anticipated this trend from the outset. Meanwhile, KPR for homes sized between 22 and 70 square meters grew by 12.88 percent in July, a slight increase from 12.76 percent in June, 12.29 percent in May, and 10.83 percent in April.
On the other hand, KPR for homes sized 21 square meters experienced a contraction of 7.56 percent in July, a deeper decline compared to the 6.95 percent contraction in June 2024. This decline is attributed to the lack of real estate developers launching commercial homes of this size, except for subsidized housing, making it reasonable for KPR in this category to continue to decrease.
Overall, property credit, which includes KPR, KPA, real estate loans, and construction financing, grew by 11.20 percent in July 2024 (year-on-year), marking the highest growth in the past 18 months. According to Investor.id, property credit had surged to 21.52 percent in January 2023 before experiencing a gradual decline.
According to data from the Indonesian Financial System Statistics (SSKI) of Bank Indonesia (BI), the total property credit in July 2024 reached IDR 915.93 trillion, reflecting a notable growth.
The growth in property credit for July 2024 is significant, primarily driven by an increase in the distribution of housing loans for landed houses, which rose by 13.94 percent year-on-year, totaling IDR 704.36 trillion, compared to IDR 618.19 trillion recorded in June. Further details have been elaborated previously.
In contrast, other property credits grew at rates below 10 percent. Besides landed houses, credit for shop houses also exhibited substantial growth, albeit at a lower value.
In July 2024, credit for shop houses increased by 28.71 percent year-on-year, reaching IDR 36.42 trillion, encompassing both ownership loans and multipurpose loans secured by shop houses.
Alongside this credit increase, the non-performing loan (NPL) ratio in the property credit sector also saw a rise.
As of July 2024, the NPL ratio was recorded at 2.68 percent (gross), showing a decrease from July 2023, which was at 2.81 percent, yet higher than the 2.47 percent recorded in December 2023.
It is anticipated that this robust growth in property credit will continue until the end of 2024, supported by government policies extending the 100 percent VAT exemption incentive until the end of December 2024.
