Jakarta. The Value-Added Tax (VAT) exemption program has catalyzed a twofold increase in new housing project inventory and propelled a 27 percent surge in demand for new homes by the end of 2023, according to research conducted by property-tech platform Pinhome.

Last November, the Indonesian government introduced incentives in the form of a full VAT exemption (100 percent) for the purchase of the first home with a selling price of up to Rp 2 billion ($127,751), alongside a VAT reduction for homes priced above Rp 2 billion up to Rp 5 billion.

"The Greater Jakarta region witnessed a notable upswing in demand following the implementation of the VAT-free program, with South Tangerang and Tangerang experiencing quarterly demand growth of 84 percent and 41 percent, respectively, in the final quarter," said Dayu Dara Permata, CEO and Founder of Pinhome, in recent research.

Areas such as Bogor, Tangerang, and Bekasi have emerged as demand hubs, with the construction of the Serpong-Bogor toll road via Parung further bolstering Bogor Regency's allure as a new residential destination.

"This underscores the significant influence of infrastructure on demand dynamics, as enhanced accessibility reinforces the property market's strength in the region," she added.

In response to the Federal Reserve's interest rate hikes, Indonesia adjusted the interest rates for Home Ownership Loans (KPR) throughout 2023. These adjustments prompted buyers to favor shorter installment tenures to alleviate long-term interest burdens.

In 2023, the fixed interest rates for KPR transactions for the new and second-hand houses market in Pinhome's platform ranged from 4 percent to 5.75 percent.

Over the year, a gradual transition occurred, with 25 percent of total demand shifting from 16-20 year installment tenures to 11-15 year tenures from the first quarter to the last quarter.

As the year 2024 commences, Pinhome anticipates a positive trend in demand for new affordable houses priced below Rp 500 million, particularly in areas surrounding DKI Jakarta poised to benefit from significant infrastructure development, and in Bali, driven by the recovery of the tourism sector.

Tangerang Regency, adjacent to South Tangerang, boasts adequate infrastructure, making it an attractive prospect for prospective new home buyers. Additionally, the accelerated development of the Serpong-Balaraja toll road is expected to broaden demand surge opportunities to Lebak Regency.

In Bogor Regency, Pinhome forecasts sustained demand growth in 2024, as the Serpong-Bogor toll road construction via Parung nears completion.

"The implementation of the golden visa policy by the Indonesian government, designed specifically to attract foreign investors, has played a crucial role in facilitating international investors to acquire property in Bali. This policy further strengthens Bali’s position as a favorite destination for property investment in 2024" Dayu added.

Meanwhile, the commencement of operations for the Jakarta-Bandung high-speed train, Whoosh, is driving the development of facilities and infrastructure around the departure stations, particularly in West Bandung Regency.

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