REPUBLIKA.CO.ID, JAKARTA -- The increase in Bank Indonesia (BI) interest rates encourages banks in Indonesia to raise its interest loan. It is a scary thing for developers as it will reduce demand for housing loans and property.

BI has raised its benchmark rates 7.5 percent after restricting ratio of loan to value (LTV) for mortgage. Chairman of Real Estate Indonesia (REI), Setyo Maharso said that it will have significant impact to housing sector, which has important role for economic growth. Its contribution in Indonesia reaches 26 to 28 percent per year. 

"Unfortunately, this high contribution is not supported by regulation of monetary authority," Maharso said recently.

The rate hike is a scary thing for business of real estate and financing ability of small communities. Therefore, REI encourages government to issue a policy package for business, especially for small and medium sized developers. Authorities are also asked not to issue a new policy package, which is contra productive as it would interfere with growth of real estate industry.

Beside interest rates problem, the main problem in housing sector is a backlog. Vice President Boediono said that demands for housing continued to increase every year, but less supply up to 15 million units.

Minister of Public Housing, Djan Faridz said that government would issue Law on Public Housing Saving (currently Tapera Bill), which has entered the final stage with relevant ministries and institutions. Tapera bill is expected to be completed in early December.

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