Reducing the Residential Backlog
    Category: Column By : Eddy Leks Read : 612 Date : Wednesday, October 04, 2017 - 14:40:32

    According to official statistics, only 83% of all Indonesian families owned a home in 2015, leaving about 11 million families without ownership. The highest ownership is West Sulawesi, where 91% of families own a home. It is lowest in Jakarta, at only 51%, leaving 1.3 million Jakartan families without a home. These figures are all above where there were in 2010, when only 78% of all Indonesian families had a house.

    While these figures show a positive trend, there is a still huge residential backlog, especially in Jakarta. This backlog, for certain cities, demands immediate attention. The condominium law and residential law, both promulgated in 2011, have stipulated that the government is responsible for the construction of public housing and condos, with assistance from private parties. Public housing and public condos are solely intended for low-income communities. For residential, landed housing, the government has issued an implementing regulation in 2016, and a similar regulation on public housing for low-income communities was also issued in 2016. But the government has yet to issue similar regulations for public condos.

    There are several regulations by the public housing and public works ministry, the finance ministry, and regional governments that deserve attention. Real estate developers and buyers have several incentives, which focus on public condominiums. These incentives include a facility on land procurement, land certification, licensing, construction loans at low interest rates, taxes, assistance on facilities construction, utilities, and infrastructure, as well as an increase of the coefficient of the building area. These incentives are given if the condominium is not less than 21 sqm but not more than 36 sqm. DKI Jakarta has a 50% discount on retribution for license applications. The discount is applicable for any licenses related to spatial planning, public work, building supervision, public infrastructure and environment.

    With regards to taxes, developers focusing on public housing or public condominium will be only charged 1% final tax and the buyer will be charged 0% value added tax (normally it is 10%). For Jakarta, Bogor, Depok, Tangerang, and Bekasi (BPHTB), for 2017, the sale value that is 0% VAT is not more than Rp 141 million for 2017 and Rp 148 million for 2018. For Java (outside greater Jakarta), the sale value with 0% VAT is not more than Rp 123 million for 2017 and Rp 130 million for 2018.

    In addition, the regional government has the right to reduce the acquisition levy for land and building transfers for every purchase of public housing or public condominium. The DKI Jakarta government has issued a regulation charging 0% in BPHTB for every taxpayer who obtains land and buildings through a first-time sale and purchase, or a first-time issuance of land right within the DKI Jakarta area, as long as the taxable value is not above Rp 2 billion.

    Furthermore, there are further incentives to the buyer to get a home ownership loan with a fixed 5% rate. So the government is doing something to reduce the housing backlog, yet implementation issues must still be resolved to assist existing players and, importantly, to encourage others to enter this segment. If that happens, the reduction of housing backlog will be accelerated.