Repositioning the Role of Loan-to-Value (LTV) in Indonesia's Housing Agenda

Topic : Housing Policy, Macroprudential Policy, Real Estate, Economic Reform, Indonesia Property Market

Despite a 100% Loan-to-Value (LTV) ratio relaxation, expanding homeownership in Indonesia requires more than just general credit stimulus. The latest policy brief published by the BUMN Research Group Lembaga Manajemen FEB UI explores why current policies need a fundamental shift.

Authored by Prof. Zaäfri A. Husodo, Ph.D., and Adam F. Amru, S.E., M.B.A., the brief highlights that while LTV easing remains relevant as a buffer for intermediation and financial system stability, it is no longer adequate as the primary instrument to close the national housing backlog.

Key Insights from the Policy Brief:

• The Bottleneck Has Shifted: With down payments pushed to zero, the biggest constraints for homebuyers have shifted to monthly installment affordability, supply and permit costs, and target data fragmentation.
• A Massive Backlog: The housing backlog remains high, recorded at approximately 9.9 million households according to Susenas, but potentially reaching around 15 million families when using DTSEN data.
• Policy Repositioning is Required: The brief argues that while LTV is effective as a stabilization tool for the property credit cycle, it is insufficient purely as a housing access policy.

Strategic Recommendations:

• Expand Targeted Financing: Scale up the Housing Financing Liquidity Facility (FLPP) and interest subsidies for first-time homebuyers and lower-middle segments.
• Reform Transaction Costs: Fully implement transaction and supply cost reforms, including BPHTB exemptions for low-income communities and faster Building Approval (PBG) processing.
• Build a National Housing Dashboard: Unify fragmented data (Susenas, DTSEN, pricing, and building permits) into a single official dashboard to improve policy targeting.

To dive deeper into how Indonesia can shift its housing strategy from generalized credit stimulus to precision-driven affordability and supply governance, download the full document below.