In a recent interview published by Kontan, Secretary General of Real Estat (sic) Indonesia, Paulus Totok Lusida called for greater collaboration from all parties that have an impact on Indonesia's real estate industry.

Collaborate and stimulate

He specifically mentioned Bank Indonesia, the Ministry of Finance, the Minister For Public Works and Human Settlements (PUPR), property associations and other related groups, to work together to stimulate the country's property sector.

The reason for this call for collaboration is because Totok believes the industry has been growing far too slowly for the last six years, according to Kontan, and it needs more than just a reduction in the Bank Indonesia (BI) benchmark rate.

The property industry needs agencies that can work together to synergize all parties. Image by Pixabay.

BI-7 Day Reverse Repo Rate

In 2016, BI introduced something called the BI-7 Day Reverse Repo Rate (BI-7DRRR) in an attempt to strengthen the effectiveness of policies in achieving set inflation targets. Essentially, it's a system whereby BI can quickly adjust interest rates according to market conditions and to boost domestic economic growth amid slowing global economic growth.

While Totok appreciates a reduction of the BI-7DRRR to 5-percent as well as dropping deposit facility and lending facility interest rates by 25 BPS to 4.25-percent and 5.75-percent respectively, he believes its impact will depend on how the banking industry responds.

Consistency is Key

As far as the property industry is concerned Totok believes more is needed. "The benchmark interest rate is down," he said,  "yes it has an impact. But, the property industry needs agencies that can work to synergize all parties," he told Kontan.

The keyword here is consistency. Gapura Bali reported last year that Totok was looking for greater cooperation between banks, developers, professional real estate agencies and the government as the current inconsistency was doing little to encourage investment.

The big question is what will encourage more investment? And what measures need to be taken for Indonesia's property industry to move forward?

Sources: Kontan, Bank Indonesia, Cermati, Gapura Bali

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