Property Consultant: VAT Incentives Contribute to Reducing Housing Backlog

Property consultancy Knight Frank Indonesia has revealed that the Government-borne Value Added Tax (PPN DTP) in the housing sector has contributed to a reduction in the housing backlog.

“PPN DTP has contributed to lowering the backlog figures in the middle segment. With the expansion of incentive segments, it is hoped that this policy will have even greater significance in addressing the housing backlog in the future,” said Syarif_fah Syaukat, Senior Research Advisor at Knight Frank Indonesia, when contacted in Jakarta on Monday.

According to Syaukat, PPN DTP has proven effective in boosting demand and housing transactions within specific price ranges, subject to various applicable conditions. As a temporary stimulus scheme, PPN DTP serves as a solution to maintain residential transaction performance for the middle class. However, she noted that the benefits should be expanded to a wider range of segments in the future. This would ensure the policy not only stimulates demand but also addresses the limitations faced by consumers in affording current housing prices.

Furthermore, Finance Minister Purbaya Yudhi Sadewa has extended the 100 per cent PPN DTP facility for property purchases until 31 December 2027. According to Purbaya, this facility is expected to benefit approximately 40,000 property units per year. He decided to extend this incentive to maintain the purchasing power of the middle class and to support the property sector, which possesses a significant multiplier effect on the economy.

Meanwhile, the Coordinating Minister for Economic Affairs, Airlangga Hartarto, stated that the property PPN DTP applies fully to the purchase of new, move-in-ready houses or properties with a maximum selling price of IDR 2 billion. For properties priced between IDR 2 billion and IDR 5 billion, the VAT exemption only applies to the first IDR 2 billion of the price, while the remainder is subject to the normal rate.

The PPN DTP facility is available to both Indonesian citizens (WNI) and foreign nationals (WNA) who meet the property ownership regulations in Indonesia. The incentive can only be utilised for a single residential unit and does not apply to the purchase of multiple units, down payments made before the policy took effect, or units resold within less than one year.