Jakarta governor candidate Anies Baswedan and his running mate Sandiaga Uno have been promising in their campaign that they will scrap down payment on home loans to allow low-income Jakartans to buy their own homes. (Antara Photo/Agung Rajasa)

No-Down-Payment Home Loan Is Not Possible, or Is It?


FEBRUARY 18, 2017

Jakarta. Bank Indonesia, the country's central bank, warns lenders not to offer mortgages without a down payment since to do so is prohibited by regulation, a top official said on Friday (17/02). Nevertheless, Jakarta governor candidate Anies Baswedan insists that the same regulation contains loopholes that will make it possible for low-income earners to get a home loan with a down payment of Rp 0.

"No, no. We have a regulation against it in our loan-to-value [requirement]. There has to be a down payment on every mortgage loan," Bank Indonesia Governor Agus Martowardojo said as quoted by Antaranews.com.


"A zero percent down payment is against [the rule] and should never be done," he said.

Agus was referring to Bank Indonesia's regulation on loan-to-value ratio for mortgages which was released in August last year.

The regulation requires banks to provide financing for up to 85 percent of a property's value for first-time home buyers buying houses or apartments larger than 70 square meters.

This means the home buyers need to come up with at least a 15 percent down payment.

The governor said the central bank will warn developers or banks that plan to offer the no-down-payment plan.

Agus made the comment as a response to Jakarta governor candidate Anies Baswedan's novel idea to make it easier for Jakarta residents to buy their own houses.

Anies and his running mate Sandiaga Uno have been promising in their campaign that they will scrap down payment on home loans to allow low-income Jakartans to buy their own homes.

Anies and Sandiaga said if elected they will ask city-owned lender Bank DKI to adjust the down payment on a home loan according to "the sum available in the applicant's savings account."

Anies, in a message to the Jakarta Globe, defended his campaign promise by quoting the same Bank Indonesia regulation.

"It's not against the rule if it is included in the regional government's program," he said, referring to the same 2016 central bank's regulation.

That regulation does not stipulate any down payment threshold for houses or apartments smaller than 21 square meters, though it insists that lenders pay close attention to risks and conform to other regulations to mitigate such risks.


Anies said homebuyers will still have to come up with proof of their ability to pay back their mortgage to the banks. For that purpose, traditionally the lenders ask for a down payment.

But Anies said, under his proposed scheme, homebuyers will only need to deposit a certain amount of money for six months in Jakarta's regional bank, Bank DKI, and that deposit would be regarded as a down payment.

"The bank will not ask for a 0 percent down payment but a down payment of Rp 0 initially. Debtors have about six months to come up with the money for the customized down payment," Anies said.

He did not explain whether the debtors could withdraw the fund after the bank agrees to disburse the mortgage.

Lana Soelistianingsih, an economist from Samuel Asset Management, said banks will follow orders from the Bank Indonesia and the Financial Services Authority (OJK) in this matter.

"I think it's just how they [Anies and Sandiaga] were trying to 'sell' their campaign. [It's impossible] unless the regional government subsidizes the down payment on behalf of the bank," she said.

Several developers are already offering zero percent down payment as a marketing gimmick, but said they actually subsidize the down payment to comply with regulation.

Indonesia's largest mortgage lender Bank Tabungan Negara offers a 1 percent down payment made possible by the central government subsidizing the rest of it under its cheap housing program.

Bank DKI declined to comment for this article.