Developers Hit Hard: Sluggish Sales, Expensive Materials, BI Rate Rises

An article published on Kompas.com reported that the conflict in the Middle East and the central bank’s decision to raise the BI Rate to 5.25 per cent on Wednesday 20 May 2026 could push up construction costs and affect the viability of the property sector. Deputy Chairman of REI, Bambang Ekajaya, said that if the fighting in the Middle East does not ease, construction costs are likely to rise. ‘Moreover, if the war in the Middle East remains unresolved, construction costs will rise sharply. If mortgage rates (KPR) non-subsidised also climb, it will surely deter potential buyers,’ Bambang said when contacted by Kompas.com on 20 May 2026. He added that the situation could create layered pressure on the property industry. On one hand property prices could rise, while on the other hand consumer purchasing power remains weak. Bambang said raising property selling prices is not an easy step for developers in the current conditions. Meanwhile, the BI Rate increase is expected to affect rising commercial interest rates, including non-subsidised mortgages. The situation is seen as potentially adding to the burden on households, both prospective homebuyers and those still repaying loans. ‘Indeed, conditions are challenging. The BI Rate increase will push up commercial rates, including for non-subsidised mortgages. The impact will certainly be burdensome for buyers and for those repaying,’ Bambang said. He noted that the effect on the property market is not expected to be immediate. He believes the impact will likely be felt in two to three months. Meanwhile, the property market is already facing significant challenges. Amid this, property players are taking cautious steps in their business. The strategy now is to stay marketing the projects already available while monitoring market developments. ‘Right now the best approach is wait and see while continuing to market what is available,’ he said. He added that some developers are expected to delay new project plans until conditions stabilise. ‘But for new projects, in my view, hold off until everything returns to normal,’ Bambang concluded.