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Indonesia central bank eases property loan rules to spur spending

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Indonesia's central bank has cut the amount of minimum down payment homebuyers must pay in an effort to boost spending amid sluggish economic growth, an official said on Wednesday.

[JAKARTA] Indonesia's central bank has cut the amount of minimum down payment homebuyers must pay in an effort to boost spending amid sluggish economic growth, an official said on Wednesday.

Bank Indonesia eased the loan-to-value (LTV) ratio requirement by lowering the minimum down payment required for first home purchases using credit to 15 per cent for houses larger than 70 square meters, from 20 per cent previously.

Minimum down payment for a second home was lowered to 20 per cent from 30 per cent, while that for a third home was lowered to 25 per cent from 40 per cent.

The central bank announced the plan to loosen property loan regulations in June as part of its effort to spur domestic consumption.

"Housing loans continue to decline. We hope the easing of LTV ratio can push credit growth," Filianingsih Hendrata, head of the Macroprudential Policy Department at Bank Indonesia told reporters.

Bank Indonesia also eased minimum down payment requirements for shariah home financing.

To implement the lower down payment measure, banks are required to maintain net non-performing loan (NPL) rates of less than 5 per cent of total loans and gross NPL of less than 5 per cent of property loans, Mr Hendrata said. Banks who fail to meet these rules have to use the earlier down payment requirements.

This is the second time the central bank has eased property loan rules in two years.

REUTERS