The government has officially extended the 100% government-borne value-added tax (VAT) policy for the purchase of landed houses and apartments until December 2027. Initially, this incentive was only valid until the end of 2026. This step was taken by the government to maintain people's purchasing power and encourage the property sector, which is considered to have a large multiplier effect on the economy.
Finance Minister Purbaya Yudhi Sadewa explained that the incentive is given for houses worth a maximum of Rp5 billion, with VAT exemption for the first Rp2 billion. The government believes that this extension will stimulate the purchase of new homes.
The policy is estimated to benefit around 40,000 housing units per year. The government is also preparing a new Minister of Finance Regulation (PMK) to emphasize this rule. With certainty until 2027, the government hopes that the property sector will become vibrant again and become one of the main pillars of national economic growth.
Director General of Economic and Fiscal Strategy Febrio Nathan Kacaribu explained that the extension of VAT DTP until 2027 is part of a broader package of fiscal support for the housing sector. The government is targeting the construction of 40 thousand housing units per year under this scheme and will soon issue a PMK as its legal basis. Febrio said this policy certainty is important so that business actors can plan development more quickly and measurably.
In addition to tax incentives, the 2026 State Budget support will also target public housing programs. The government continues the Self-Help Housing Stimulant Assistance (BSPS) for 40 thousand units and the Housing Financing Liquidity Facility (FLPP) program for 350 thousand housing units this year. Next year, Febrio said the target of the two programs will increase to a total of 770 thousand housing units.
Relief for developers
Deputy Chairman of Real Estate Indonesia (REI) Bambang Ekajaya assessed that the extension of VAT DTP provides breathing space for the property sector because the 11 to 12% VAT burden on transactions becomes zero during the incentive period.
The impact is immediately felt on the buyer's side through an effective price reduction. He said this policy was positive to encourage consumer decisions in making purchases. "Property prices will be reduced," Bambang said on Thursday (16/10/2025).
He explained that this tax policy goes hand in hand with financing support from banks. The housing people's business credit (KUR) scheme is available for consumers to purchase, renovate, or add buildings, and for developers to execute projects faster. According to him, the combination of fiscal incentives and access to funding can accelerate market movement.
Furthermore, Bambang explained that financing support is also available through the KUR Housing program. This scheme allows developers to obtain a credit ceiling of up to Rp20 billion over four years with interest subsidized at 6% of commercial rates.
According to him, the policy helps accelerate the construction of new projects because it lowers the interest burden borne by developers. "Through KUR Housing, the interest for developers is only around 6% of commercial interest which is usually 12%," he said.
Although he welcomed the extension of VAT DTP, Bambang warned not to forget the demand side from consumers. According to him, the BI checking process is one of the obstacles because many prospective buyers are filtered out due to small arrears such as online loans or vehicle installments. This condition makes most home enthusiasts not pass the bank's assessment. Bambang assessed that there needs to be an easing that still pays attention to the principle of prudence so that more people can access housing loans.
Bambang highlighted the 5% cost of acquiring land and building rights (BPHTB), which he said was still too heavy for buyers. Bambang said that in some areas there is already a policy of cutting it to 2.5% for transaction values of up to Rp500 million, but the policy is limited.
He proposed that the rebate be expanded, for example with a full exemption for houses up to IDR2 billion and a 2.5% rebate for values above that up to IDR5 billion. "If it is combined, it will be a duo of incentives that can reduce property prices by around 16 to 17%," he said.
President Director of PT Shealka Bangun Property Raymond Ardan Arfandy, assessed that the VAT DTP extension policy is very helpful for developers, especially in the regions. The entrepreneur, who works on many housing projects in Makassar, assessed that the previous 11% VAT burden was quite burdensome for transactions, so the government's policy of bearing taxes provides new space for sales.
Many developers immediately take advantage of this momentum so that ongoing projects can be absorbed by the market. "So that the VAT is borne by the government," he said Sunday (19/10/2025).
Raymond explained that the current property market is divided into two, namely purchases for necessity and for investment. Demand for houses for basic needs such as new families is still stable, while demand for investment is declining because profits are not as big as a decade ago.
In his notes, in the period 2010 to 2013 the increase in property prices could reach 20% per year, but this is no longer the case. Therefore, according to him, buying interest in the investment segment needs to be encouraged again with additional incentives. "The problem is not in supply, but in demand, he said"
To strengthen the demand side, Raymond proposed the implementation of investment-based tax amnesty . He proposed that funds that have not been recorded in the tax system can be invested first before getting tax amnesty.
This scheme will provide dual benefits of encouraging real sector investment while expanding the country's tax base. "Invest first and then you can get tax amnesty, so that the money in the community can rotate in the property sector," he said.
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Raymond also sees the importance of relaxing mortgage regulations to make financing more accessible. He gave an example, currently banking procedures can include up to dozens of stages of documents, thus slowing down the realization of credit.
Financial authorities need to simplify the process and provide certainty for developers through guarantee mechanisms such as buyback guarant ees that can be strengthened with insurance support. This step, he said, will make banks more confident in lending so that it will stimulate the housing market.
Center of Reform on Economics (CORE) economic researcher Yusuf Rendy Manilet sees the extension of VAT DTP incentives until 2027 as a positive step. According to him, the property sector has extensive links with other industries such as cement, steel, and iron, so any growth will encourage economic activity in many sectors.
"I think what the government is doing in this case is a positive thing because the linkage is quite large," Yusuf said. This policy, he said, can also help reduce the burden of buying a house, especially for groups of people who face limited access to ownership.
However, Yusuf reminded that the sustainability of the impact of this policy is highly dependent on other policies such as the reduction in lending rates and the stability of people's purchasing power. The transmission of monetary policy to lending rates takes a longer time so that it is not immediately felt by prospective buyers.
"If lending rates are still high and mortgages are also relatively high, people will postpone house purchases until interest rates come down," he said. In addition, policy differences at the regional level such as adjustments to BPHTB and land and building tax (PBB) can also affect people's buying interest.
Furthermore, Yusuf emphasized that the housing issue is a complex problem that cannot be solved with just one tax policy. According to him, the root of the housing backlog problem is also related to the increase in house prices that is not proportional to income growth, limited land, and the dominance of workers in the informal sector.
Increasing wages and policy coordination between the central and regional governments, he said, are key so that incentives such as VAT DTP can run effectively and on target.
"This VAT DTP policy cannot stand alone, but must be followed by structural improvement steps so that the backlog problem can be unraveled and resolved," he said.
Chris Wibisana contributed to this article
