Country Profile

Source: Future Challenges, Jakarta Skyline, 2012

Indonesia has a relatively high home owner occupation rate, with 67 percent of urban households owning a home, of which only 26 percent have a mortgage, as of 2007. Indonesia’s residential debt to GDP ratio is extremely low, at 2 percent in 2007.

 Indonesia’s housing finance system is dominated by universal/commercial banks. 95 percent of mortgages are variable rate ARMS, typically on 10-year fully amortized terms at average adjustable interest rates of 14 percent to 15 percent. As of February 2009, approximately 49 percent of outstanding loans were originated by private banks and 48 percent were originated by BTN, the government mortgage bank, while the remaining 3 percent were originated by development and foreign banks. The Ministry of Housing runs a subsidized housing finance program comprised of upfront and buy-down subsidies for lower- and middle-income households.  

In 2005, the government instituted legislation to create an RMBS institution known as PT Sarana Multigriya Finansial (SMF). SMF is fully owned by the Government of Indonesia and is based on the Collective Investment Contract–Asset Backed Securities structure. SMF purchases mortgage receivables and issues MBS notes to investors. SMF provides credit enhancement in the form of a Reserve Account. SMF’s criteria to purchase mortgage includes: homes that are owner-occupied, have a maximum LTV of 70 percent, have been appraised by an independent appraiser, have full documentation, have no recent delinquency, and have life and credit insurance.  

In February 2009, SMF issued Rp 100 billion of notes, which had a Moody’s rating of The notes were listed on the Indonesian Stock Exchange, had a coupon payment of 13 percent, and had an average life of 2.57 years based on quarterly amortization.  

SMF also holds workshops to train banks and other mortgage originators on using standardized originating practices, to make it easier to securitize the loans and create a comprehensive database of housing information. In 2008, the mortgage debt to GDP ratio in Indonesia was less than 2.6 percent, compared to 7 percent in India, 31 percent in Malaysia and 15 percent in China. The government hopes that SMF will help to meet the annual need for 800,000 new houses in the country.  

About the Editor

PT Sarana Multigriya Finansial (SMF)

SMF's vision is to become an independent and trust-worthy company with the ultimate goal of making every family own their home. SMF's mission:

- To promote and develop secondary mortgage market.
- To develop the availability of sustainable long/ mediumterm
funds for housing sector.
- To increase affordability of every family in Indonesia for
home ownership (social mission).