New LTV and FTV Ratios for Property and Motor-Vehicle Ownership

Bank Indonesia (“BI”) has finally relaxed its provision on property financing facilities through the issuance of Regulation No. 18/16/PBI/2016 on Loan-to-Value Ratios and Financing-to-Value Ratios for Loan and Financing Facilities for Property and for the Advanced Payments of Loans or Financing Facilities for Motor Vehicles (“2016 Regulation”).
 
The 2016 Regulation sets higher Loan-to-Value (“LTV”) ratios for commercial banks and Financing-to-Value (“FTV”) ratios for sharia banks, as regards the granting of any loan/financing facilities involving property to the general public. Consequently, the public should be able to enjoy more flexible access to financing facilities for their first, second and third properties. In addition, the 2016 Regulation also updates the various provisions which regulate motor-vehicle loans and financing by both commercial and sharia banks.
 
Prior to the issuance of the 2016 Regulation, these matters were regulated under BI Regulation No. 17/10/PBI/2015  (“2015 Regulation”).[1]
 
The 2016 Regulation is of relevance to both commercial and sharia banks (“Banks”), as well as to the public in general as the consumers of loans and financing products (“Credit Facilities”) for the purchase of property and motor vehicles.
 
Credit Facilities
 
Credit Facilities under the 2016 Regulation can be extended for the ownership of landed houses, multi-dwelling units, apartments, home offices and shop houses. The maximum amount of credit that can be granted by banks is to be calculated based on current LTV and FTV ratios.  LTV and FTV ratios themselves refer to percentages which represent the maximum funding which can be provided to consumers by Banks, based on the loan amount and the value of the property in question.[2]
 
Note that, in a manner similar to the 2015 Regulation, the LTV and FTV ratios for credit facilities as set out under the 2016 Regulation do not apply to the government housing program.[3]
 
LTV Ratios for Conventional Banks
 
LTV ratios for conventional banks are to be determined based on a consideration of the type of property which will be purchased, the area in which the property is located, as well as the type of consumer (first-time applicant, second-time applicant, or third-time applicant).
 
The LTV ratios for conventional banks set out under the 2016 Regulation are as follows:[4]

Type of Property	Property Area	Type of Applicant and Maximum Ratio
		First-Time Applicant	Second-Time Applicant	Third-Time Applicant
House	22m2 – 70m2	-	85% (previously 80%)	80% (previously 60%)
	> 70m2	85% (previously 80%)	80% (previously 70%)	75% (previously 60%)
Apartment	22m2 – 70m2	90%	85% (previously 80%)	80% (previously 70%)
	> 70m2	85% (previously 80%)	80% (previously 70%)	75% (previously 60%)
	< 21m2	-	85% (not previously regulated)	80% (not previously regulated)
Home Office	-	-	85% (previously 80%)	80% (previously 70%)
Shop House	-	-	85% (previously 80%)	80% (previously 70%)