May 26, 2016 / 3:57 AM / a year ago

Fitch: Indonesia Property Deregulation to Have Limited Short-Term Impact

(The following statement was released by the rating agency) JAKARTA/SINGAPORE, May 25 (Fitch) Fitch Ratings says that any moves that Bank Indonesia undertakes to loosen lending regulations and further deregulate the Indonesia property market will take time to translate into a significant and sustained improvement in demand. Activity has waned in the past couple of years as potential buyers delayed purchases and developers put off launching new projects - given slowing economic growth and diminishing demand. This is reflected in the consolidated property presales of the seven property developers that Fitch tracks, which fell by 12% and 55% yoy in FY15 and 1Q16, respectively, as per Fitch's recently published report Indonesia Property Watch - 1Q16. The central bank, having cooled the property market in 2013, is now considering measures to stoke the market in order to boost growth. Bank Indonesia is reviewing the down-payment requirement for property purchases under a mortgage scheme, after relaxing it by an average of 10% in June 2015. The applicable down-payment requirement currently is 20%, 30% and 40% for first-, second- and third-houses/apartments, respectively, for a building area of over 70 square metres; the requirement for fourth or more houses/apartments is capped at 40%. Other measures being considered include allowing homeowners to take out mortgages to purchase a second property that is "off-plan", or one that is pre-construction. Current regulations only allow homeowners to take out "off-plan" mortgages on first homes, whereas any mortgage taken out on second or more properties needs to be on completed units. Bank Indonesia plans for these changes to be implemented within the next few weeks. Fitch believes these revisions are generally positive for the property sector. But the likely time-lag for a meaningful boost to property demand could be anticipated following the delays in implementing the tax amnesty scheme, which deters property developers from launching new projects. Overall, Fitch believes that property developers with a stronger track record and strong recurring income streams - PT Bumi Serpong Damai Tbk (BB-/Stable), PT Lippo Karawaci Tbk (BB-/Stable) and PT Pakuwon Jati Tbk (BB-/Stable) - will be able to continue to outperform their peers and more resilient in the face of operating challenges. Contact: Bernard Kie Analyst +62 21 2988 6815 PT Fitch Ratings Indonesia DBS Bank Tower 24th Floor Suite 2403 Jl Prof Dr Satrio Kav 3-5 Jakarta 12940 Hasira De Silva, CFA Director +65 6796 7240 Media Relations: Leslie Tan, Singapore, Tel: +65 67 96 7234, Email:; Wai-Lun Wan, Hong Kong, Tel: +852 2263 9935, Email: Additional information is available on ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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