Background

Bank Indonesia has issued Bank Indonesia Regulation No. 20/8/PBI/2018 on Loan to Value Ratio for Property Loan, Financing to Value Ratio for Property Financing, and Down Payment for Loan or Vehicle Financing (“PBI 20/2018”). This regulation revokes the previous regulation, namely Bank Indonesia Regulation Number 18/16/PBI/2016, and come into force since 30 July 2018.

The background of the issuance of PBI 20/2018 is to encourage a certain balanced and qualified bank’s intermediating function to support the national economic growth, with improvements to macro prudential policies through Loan to Value Ratio for Property loan, Financing to Value Ratio for Property Financing, and Down Payment for Vehicle Financing.

The improvements in PBI 20/2018 are as follows:

  1. Adjustment of Loan to Value Ratio for Property Loan (“PL”) and Financing to Value Ratio for Property Financing (“PF”).
  2. Adjustment of Stages Arrangement and Amount of Disbursement of PL or PF for Indent Property Ownership.
  3. Adjustment of the Maximum Amount of PL or PF Facilities for Property Ownership that Is Not Available in Full (Indent).

Adjustment of Loan to Value Ratio for PL and Financing to Value Ratio for PF

Loan to Value Ratio (“LTV Ratio”) is a ratio number between Loan value which can be given by the Conventional Commercial Bank against the collateral value in the form of property at the time of loan is granted based on the latest assessment results. Meanwhile, the Financing to Value Ratio (“FTV Ratio”) is the ratio between the Financing value that can be provided by a Sharia Commercial Bank (SCB) or Sharia Business Unit (SBU) against value of the collateral in the form of Property at the time of Financing is granted based on the latest assessment results.

First PL and PF Facilities

Bank that provides (i) PL and PF for the first facility, and (ii) PL or PF for the second facility and henceforth, for the site house with a building area ​​up to 21m2, must fulfill the requirement of LTV Ratio for PL and FTV Ratio for the PF which is determined in accordance with the bank’s policy. The determination of the bank’s policy regarding the provisions of the LTV Ratio for PL and the FTV Ratio for PF must consider to the precautionary principle in providing loan or financing.

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PL and PF Facilities for the Second and henceforth

Meanwhile, for the second PL or PF and henceforth, must fulfill the LTV and FTV Ratios as follows:

  1. for (i) LTV Ratio for PL, and (ii) FTV Ratio for PF with the Murabahah and Istishna Agreement ‘, as follows:
    • Landed house PL and Landed house PF with a building area ​​more than 70m2 with a 80% maximum;
    • Landed house PL and Landed house PF with a building area of ​​22m2 up to 70m2 with a 85% maximum;
    • Apartment PL and Apartment PF with a building area above 70m2 with a 80% maximum;
    • Apartment PL and Apartment PF with a building area from 22m2 to 70m2 with a 85% maximum;
    • Apartment PL and Apartment PF with a building area ​​up to 21m2 with a 85% maximum; and
    • House-cum-shop PL or House-cumoffice PL and House-cum-shop PF or House-cum-office PF with a 85% maximum;
  2. for (i) LTV Ratio for PL, and (ii) FTV Ratio for PF with Mutanaqisah and Ijarah Muntahiya Bittamlik Musyarakah Agreement:
    • Landed house PF with a building area above 70m2 with a 85% maximum;
    • Landed house PF with a building area of ​​22m2 to 70m2 with a 90% maximum;
    • Apartment PF with a building area above 70m2 with a 85% maximum;
    • Apartment PF with a building area from 22m2 to 70m2 with a 85% maximum;
    • Apartment PF with a building area ​​up to 21m2 with a 85% maximum; and
    • House-cum-shop PF or House-cum-office PF with a 85% maximum.

Requirements for Bank

In order to implement the LTV Ratio and FTV Ratio as mentioned above, bank must fulfil the following requirements:

  • The ratio of bad Loan or ratio of bad Financing in net is less than 5%; and
  • The bad PL ratio or bad PF ratio is grossly less than 5%.
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In the event that a bank does not fulfill the requirements mentioned above, there are restrictions on the LTV ratio and FTV ratio for the first facility. Meanwhile, for the LTV ratio and FTV ratio for bank that do not fulfill the requirements lower than bank that meet the requirements.

Adjustment of Maximum Amount of Property Loan or Property Financing Facilities for Property Ownership that  Not Available in Whole (Indent)

PL or PF facilities for property ownership are a maximum of 5 (five) PL or PF facilities. Further provisions regarding the granting of PL or PF will be regulated in the Board of Governors’ Member Regulations.

 

Adjustment of Stages Arrangement and Amount of Disbursement of Property Financing for the Ownership of Indent Property.

Bank that provides PL or PF for the ownership of indent property must gradually disburse the PL or PF with the following conditions:

  • The highest is 30% of the ceiling after the signature of the PL or PF agreement, without the need to assess development progress;
  • The highest is 50% of the ceiling after disbursement up to the completion of the foundation, based on the assessment of development progress;
  • The highest is 90% of the ceiling after disbursement up to the completion of the roof cap, based on the assessment of development progress; and
  • As much as 100% of the ceiling after the signing of the minutes of handover, which are completed with the sale and purchase agreement and the mortgage deed or power of attorney to impose the mortgage.

In addition, PBI 20/2018 also stipulates in case of deed of sale and purchase and deed of granting of security rights or power of attorney imposes mortgage are not yet available, then it can use a cover note from a notary or a land deed official (“PPAT“) which among others include information on completion of the document and the capability of the notary or PPAT to deliver it.

Kenny Purba