Jakarta. The government announced Tuesday it would continue to entirely exempt value-added tax (VAT) for house purchases until the end of 2024.

The VAT exemption was previously in effect until June 2024. The government originally planned to lower the subsidy from 100 percent to 50 percent until year-end. However, President Joko “Jokowi” Widodo has decided not to cut the subsidies to bolster the property sector which has been key to the national economy.

“On tax incentives, with Mr. President’s approval, the government has decided to implement the government-borne VAT incentive for the housing sector. We will cover 100 percent [of the VAT] until December 2024,” senior minister Airlangga Hartarto said in Jakarta on Tuesday.

This 100-percent VAT subsidy will enter into force starting in September. The Finance Ministry is currently preparing the ministerial regulation for this incentive. Airlangga added: “The housing sector becomes a priority. It is one of the largest spendings after food and beverages, so anything that has to do with the housing sector is important for the middle class.”

Indonesia is planning to add the quota for its so-called Home Ownership Liquidity Assistance (FLPP) program. The scheme allows low-income individuals to access affordable homeownership at a low interest rate. Starting September 1, the government will increase the FLPP quota from 166,000 to 200,000 units.

“This policy should boost the middle class’s contribution to the construction sector. We know how construction and housing sectors have huge multiplier effects,” Airlangga said.

The VAT rate for housing purchases in Indonesia stands at 11 percent of the property’s price.