Indonesia’s government announces plans to eliminate property taxes and extend mortgage tenures to stimulate the housing market and support President Prabowo Subianto’s goal of three million new homes annually.
Indonesia’s Central Bureau of Statistics (Badan Pusat Statistik or BPS) reported a slowdown in the growth of household spending on housing in the third quarter of 2024 compared to the same quarter the previous year. Acting Head of BPS, Amalia A. Widyasanti, confirmed a slowdown in year-on-year household consumption growth, which declined from 5.05% in Q3 2023 to 4.91% in Q3 2024.
“Components of household consumption that have experienced a year-on-year slowdown include housing and household equipment, transportation and communication, as well as restaurants and hotels,” Widyasanti said in a press conference held in Central Jakarta on Tuesday, the 5th of November.
Widyasanti attributed the slowdown to a combination of factors affecting multiple sectors, including housing, which has seen a noticeable reduction in spending growth over the past year.
Due to this problem, the Indonesian government is planning to abolish property-related taxes, including the Value Added Tax (VAT), the Land and Building Acquisition Tax (BPHTB), and the Income Tax (PPh), as part of a broader strategy to stimulate the housing market and achieve an ambitious annual target of constructing three million homes.
The initiative, championed by the Minister of Housing and Residential Areas, Maruarar Sirait, and the Minister of Home Affairs, Tito Karnavian, aligns with President Prabowo Subianto’s housing programme and is being introduced in response to signs of a slowdown in household spending on housing.
In a recent announcement, Sirait revealed that he intends to propose the removal of VAT and PPh to the Minister of Finance, Sri Mulyani.
“Incentives for the provision of three million homes: tax incentives from the Ministry of Finance [including] the abolition of PPh and VAT,” he said, explaining the proposal during a Developer Gathering in Jakarta on Friday, the 8th of November.
Karnavian, meanwhile, called on provincial and regional governments to back Subianto’s target of three million new homes annually, noting that local government support is essential for the plan’s success.
At present, home purchases in Indonesia are subject to an 11% VAT and a 5% BPHTB, while sellers face a 2.5% Income Tax. The planned tax cuts are expected to make the property more affordable for buyers and stimulate increased demand in the market. With these cuts, the government aims to stimulate growth in the housing market, making homeownership more attainable for millions of Indonesians and reinvigorating the country’s economy.