Indonesia Extends 100% VAT Incentive and Increases FLPP Quota to 200,000 Units

The Indonesian government has decided to extend the 100% Value-Added Tax (VAT) incentive until December 2024 for home purchases. Previously, the incentive was only set at 50%, but now it has been increased to encourage more property transactions. Additionally, the government has raised the quota for the Housing Financing Liquidity Facility (FLPP) from 166,000 units to 200,000 units. This increase is supported by an additional budget allocation of Rp500 billion, aimed at boosting the property sector, particularly subsidized housing.

Chairman of the Central Executive Board of the Real Estate Indonesia (REI), Joko Suranto, expressed that the extension and quota increase is excellent news. He said these policies are in line with REI’s efforts. According to Joko, this decision shows the Indonesian government’s serious commitment to the property sector, especially housing, which plays a significant role in driving the national economy. The property sector is closely linked to various industries in the real sector.

Joko also highlighted that the extension of the 100% VAT incentive is expected to revive home sales, which had dropped by 30%-35% after the VAT discount was reduced to just 50% in July 2024. He predicts that the extension of this incentive will help home sales return to the same level as in the January-June 2024 period. During that period, the absorption of the VAT budget averaged between Rp160 billion and Rp170 billion per month. According to REI data, most of the VAT incentive usage, around 70%, comes from homes priced below Rp1 billion.

The increase in the FLPP quota from 166,000 units to 200,000 units is also seen as a positive step for low-income households and subsidized housing developers. While the approved quota falls short of REI's original proposal of 250,000 units, the increase is still welcomed. Joko is optimistic that the enlarged quota will help drive the success of the 3-million-home program planned by President-elect Prabowo Subianto. REI hopes that the FLPP budget will continue to grow in 2025 and beyond.