Bank of Indonesia (BI) guarantee the rise in the BI Rate Not Affect Property Loan Interest

Bank Indonesia increased its benchmark interest guarantee or BI rate will not affect interest bank loans, including credit property.  BI binding rules of transparency of the banking industry through loans or the prime lending interest rate.



With this rule, the central bank can monitor the composition of bank lending rates.  Including monitoring and savings deposit interest rates.  BI the authority to ask the bank collapse the specific cost components, for mortgage interest not rise.

Guarantee of BI is a true blessing for the property sector issuers.  It's known, at 75 percent - 80 percent of total purchases of houses in Indonesia through Housing Loan (mortgage).

As is known, the central bank earlier this month has hoisted the benchmark interest rate by 25 basis points (0.25 percent) to 6.75 percent.  This is the first increase since 18 last.

Reza Nugraha Bhakti Securities analyst believes an increase in the BI rate by 0.25 per cent, if it was followed by emerging mortgage interest, will not significantly affect the property sector.  But if the BI rate this year rose from 0.75 percent - 1 percent, could have a negative impact to the growth in the property sector.

Reza count, if the BI rate increase of 0.75 percent - 1 percent, mortgage rates has the potential to rise to around 11 percent - 12 percent.  At present, he said, mortgage rates in the range 9.5 percent to 10 percent.

If mortgage rates rise by 11 percent - 12 percent, then the sale of the property only grow as high as 7 percent - 10 percent so far this year.  And if mortgage rates below 10 percent, Reza estimate, sales of properties throughout 2011 may increase to 10 percent - 15 percent.

Majapahit Securities analyst estimate Supriyadi if rates rise 100 basis points, then mortgage rates will reach 13 percent - 14 percent.  "If the BI rate rose 100 basis points, the central bank could not manage, because the cost of funds banks will go up. If credit interest was not raised, bank profits will be eroded," said Supriyadi.

He predicts, property sales this year could grow 10 percent, taking into account rising mortgage rates.  But if the mortgage does not rise, the growth of property sales could be 15 percent.

Expansion properties be sure, economic growth projection of about 6 percent - 6.5 percent this year likely to boost the property business.  As the laws of economics, economic growth will encourage the purchasing power.  "The increase in revenue push some people to buy homes to meet the primary needs," said Budhy Siallagan, eTrading Securities analyst.

Thus, issuers are aggressively expanding property has the potential to enjoy significant sales growth.  Sure, developers do not want to lose the momentum of expansion at low interest rates.

PT Alam Sutera Tbk (ASRI), for example, developed a superblock area I Alam Sutera and build a new area in the Market Thursday, Tangerang.  Other issuers, PT Bumi Serpong Damai Tbk (BSDE) expanding township BSD City phase 2.  Then Podomoro Land PT Agung Tbk (APLN), which started adding properties to the outskirts of Jakarta area.

Diversification measures taken by the developers as well.  For example, PT Lippo Tbk (LPKR) which continues to boost its health care division, namely the hospital.

Supreme Tbk (SMRA) also did not want to miss.  SMRA will develop the shopping center this year.  APLN also plans to build several new malls in Java and outside Java island.

Step diversification certainly will add to earnings issuer property.  "LPKR, for example, will earn additional revenue from the hospital," said Supriyadi.  Business malls, apartments, and hospitals, according to Reza, could compensate for retention growth in home sales this year if the BI rate rose sharply.