Thousands of home buyers plan to take out loans in next 3 years

The Jakarta Post ,  Jakarta   |  Tue, 07/22/2008 10:14 AM  |  Headlines

Nearly half the Indonesians planning to buy a house in the next three years intend to take out loans to finance their purchase, with more than 50 percent of those preferring to seek a loan from a commercial bank or cooperative, a survey has found.

"That implies 55,800 new mortgage clients for the next three years, worth an equivalent of Rp 6.6 trillion (US$710 million)," the survey, conducted by the International Finance Corporation (IFC), a private arm of the World Bank, says.

Almost 36 percent of the families surveyed said they would buy the house "outright with cash from their own resources".

The survey questioned 1,281 families living in seven major cities -- Greater Jakarta, Medan, Makassar, Bandung, Surabaya, Semarang and Denpasar -- between Dec. 2007 and June this year.

It targeted families who planned to buy a house in the next three years.

Of the total, 49 percent -- or about 627 respondents -- said they planned to take out loans to finance their home purchases. Of these, 52 percent said they considered commercial banks to be the most important sources of loans.

Around 16 percent of those planning to take out loans said they would prefer to borrow the money from family or friends.

The survey, the Indonesia Housing Finance Survey 2008, will be presented at the Indonesia Housing Finance Roundtable, a working discussion that assembles commercial bankers, government agencies and other housing finance practitioners and stakeholders.

Another key finding in the survey was that most respondents prefer fixed-rate payments to variable rates, N. Kokularupan, the IFC's principal housing finance specialist, said at the survey's launch Monday.

"The respondents will prefer to have fixed rates because they want to set aside a constant amount of money to pay the rates. They can still use their money to fund other basic needs, such as food," he said.

The survey also found that many respondents would choose banks or cooperatives that ask for lower deposits.

Approximately 461 respondents will look for a down payment with 11 to 15 percent distribution. Another 27 percent will search for less than 10 percent distribution.

When asked whether they would choose a 5-year or a 10-year term, 76 percent of the respondents went for the 10-year term. Some 59 percent of the respondents would take a 15-year term, if they had to choose between that and a 10-year term.

However, the survey found that an alarming level of those planning to take out loans do not have adequate knowledge about mortgages -- 27 percent of the total respondents. Moreover, only 2.06 percent of the respondents who claimed to have some mortgage knowledge could correctly answer five basic questions about mortgages.

"I hope commercial banks and cooperatives will hold more seminars and exhibitions so the public can learn more about home loans," N. Kokularupan said. (ewd)

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