Jakarta. Finance Minister Sri Mulyani Indrawati announced on Friday that the government's program to exempt value-added tax (VAT) on home purchases priced at Rp 2 billion or lower will come into force later this month, effective until December 2024.

The minister explained that this incentive applies to homes with a maximum price of Rp 5 billion, with the government covering the VAT up to Rp 2 billion. For example, if a house is priced at Rp 5 billion, the buyer will still need to pay VAT on the remaining Rp 3 billion.

Houses priced at over Rp 5 billion will remain subject to the standard 11 percent VAT.

"The VAT incentive will be implemented later this month to support our economic growth momentum," Sri Mulyani said during a news conference in Jakarta.

She also mentioned that from July to December 2024, the incentive will be reduced to 50 percent of the VAT.

The property sector contributes significantly to the economy, accounting for up to 16 percent of the gross domestic product and 9 percent of overall tax revenue, according to Wahyu Utomo, the head of the Finance Ministry's state budget policy center. Furthermore, this sector creates 13 million jobs.

Wahyu expressed his expectations that this incentive would help maintain growth at around 5.1 percent for the fourth quarter and the entire year.

In addition to the VAT incentive, the government is also offering a Rp 4 million subsidy for the purchase of low-cost housing.