Indonesia to Remove Property Taxes to Boost Housing Market
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Loading... - Bingwen Zhang
- 10 Dec 2024
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To stimulate the housing market, the Indonesian government has announced plans to eliminate property taxes and extend mortgage tenures. This initiative supports President Prabowo Subianto’s ambitious goal of constructing three million new homes annually.
Recent data from Indonesia’s Central Bureau of Statistics (Badan Pusat Statistik or BPS) indicates a slowdown in household spending on housing. In the third quarter of 2024, year-on-year household consumption growth fell from 5.05% in Q3 2023 to 4.91%. Acting Head of BPS, Amalia A. Widyasanti, highlighted that various components of household consumption, including housing, household equipment, transportation, communication, and services like restaurants and hotels, have experienced this decline.
Widyasanti attributed the slowdown to a combination of factors affecting multiple sectors, particularly housing, which has seen a noticeable reduction in spending growth over the past year.
In response to these challenges, the Indonesian government plans to abolish several property-related taxes, including:
i. Value Added Tax (VAT)
ii. Land and Building Acquisition Tax (BPHTB)
iii. Income Tax (PPh)
These tax reforms are part of a broader strategy to stimulate the housing market and achieve the target of three million new homes annually. The initiative is championed by Minister of Housing and Residential Areas, Maruarar Sirait, and Minister of Home Affairs, Tito Karnavian, who emphasize the need for local government support to ensure the plan's success.
In a recent announcement, Sirait expressed his intention to propose the removal of VAT and PPh to the Minister of Finance, Sri Mulyani. He stated, “Incentives for the provision of three million homes: tax incentives from the Ministry of Finance [including] the abolition of PPh and VAT,” during a Developer Gathering in Jakarta on November 8.
Impact on the Housing Market
Currently, home purchases in Indonesia are subject to an 11% VAT, a 5% BPHTB, and a 2.5% Income Tax for sellers. The planned tax cuts are expected to make properties more affordable for buyers, thereby stimulating increased demand in the housing market. By removing these taxes, the government aims to make homeownership more attainable for millions of Indonesians, ultimately reinvigorating the country’s economy.
This strategic move reflects the government's commitment to addressing the challenges in the housing sector and fostering a more inclusive environment for homebuyers, which is crucial for the overall economic recovery and growth in Indonesia.
