Indonesia cuts a property tax in bid to aid home sales

[JAKARTA] Indonesia is cutting in half a tax on home sales from September, according to a presidential regulation, a move that should help the country's property sector.

The sellers of homes will be subject to a final tax of 2.5 per cent of the transaction price, instead of the current 5 per cent, based to the regulation signed by President Joko Widodo on Aug 8.

For purchases of homes smaller than 36 square metres, the rate will be only 1 per cent. The regulation said this is "to give protection for citizens with low income".

Ken Dwijugiasteadi, head of Indonesia's tax office, told Reuters on Friday the measure is "to support the property sector and to help aid purchasing power because one of the people's primary need is to own a house".

Trimegah Securities said the regulation should benefit property companies such as PT Modernland Realty Tbk and PT Intiland Development Tbk.

It said they should expect better net margins, and that the regulation "should offset high interest cost, which ultimately leads to heightened dividend payment ability".

Sales in the country's residential market rose 4.02 per cent in April-June from the previous quarter, when they increased 1.51 per cent, a recent Bank Indonesia survey showed.

In June, the central bank announced it would ease downpayment requirements for property lending in August in a bid to spur sector growth. Officials have said regulations backing the changes would be released soon.

REUTERS