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MORTGAGE MARKET IN INDONESIA

MORTGAGE MARKET IN INDONESIA. International CONFERENCE On “ housing : A n Engine for Inclusive Growth” New Delhi, april 1 1 -1 3 , 2013. Prepared By: PT. SARANA MULTIGRIYA FINANSIAL (P ersero ) INDONESIA . AGENDA. ECONOMIC OUTLOOK P RIMARY MORTGAGE MARKET IN INDONESIA

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MORTGAGE MARKET IN INDONESIA

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  1. MORTGAGE MARKET IN INDONESIA International CONFERENCE On “housing: An Engine for Inclusive Growth” New Delhi, april 11-13, 2013 Prepared By: PT. SARANA MULTIGRIYA FINANSIAL (Persero) INDONESIA

  2. AGENDA • ECONOMIC OUTLOOK • PRIMARY MORTGAGE MARKET IN INDONESIA • SECONDARY MORTGAGE MARKET IN INDONESIA • CONCLUSION

  3. ECONOMIC OUTLOOK

  4. POPULATION DEMOGRAPHIC China 1,3 Bio India 1,2 Bio US 313 Mio Indonesia 257 Mio Population Pyramid • Source : BPS (Biro Pusat Statistik) (www.bps.go.id), 2010, seconday data, 2012) Indonesia has the 4th biggest population in the world with many of its people are still on their productive ages, most people lives in Java island

  5. GDP GROWTH & POPULATION • Source : BPS (Biro Pusat Statistik) 2012 (www.bps.go.id) • Estimation :1,49% population growth/year In general the GDP growth for the last five years is above 6%, only in 2009 relatively declined at 4.6% due to the global economic crisis.

  6. MORTGAGE BASE LENDING RATE, BI RATE, & INFLATION • Source : Bank Indonesia ‘Des 2012 (www.bi.go.id) In the beginning of 2012, Indonesia economy has become more stable, as shown on the inflation rate trend. Considering the economy condition, Bank Indonesia has decided to maintain BI Rate at 5,75%. Mortgage base lending rate, which uses BI rate as its benchmark, also remains stable.

  7. PRIMARY MORTGAGE MARKET IN INDONESIA

  8. MORTGAGE TO GDP RATIO Countries Mortgage to GDP Ratio Comparison Per January 2012 Indonesia Mortgage to GDP Ratio Mortgage to GDP ratio of Indonesia at the end of 2011 which is around 2.6% is still below many other countries. In 2012, Indonesia mortgage to GDP ratio has already increased to 2,70%. • Source : SMF Research ‘January 2012, Bank Indonesia

  9. HOUSING DEMAND No. Of Indonesian citizen 257 milion Population growth 1.49% per year Needs for housing 800,000 per year Estimation National demand position (*) 15 milion 20 years Estimation time to address 750,000 per year Needs for housing Total housing demand: 1,550,000 per year (*) SMF estimate for 2012

  10. HOUSING SALES, CONSTRUCTION LOAN & RESIDENTIAL PROPERTY PRICE INDEX Housesales has been experiencing strong growth since significant drop in 2009. Total house sales for 2011 is 242,000 units,this number also shows the growth in new constructed houses. On the other hand, construction loan at the end of 2012 has reached 95.921 billion IDR. The residential property price also increase from time to time. • Source : BI, Ministry of Housing, REI, APERSI, Spire estimation & Analysis

  11. SUPPLY AND DEMAND • The gap between supply and demand of houses remainsbig . • The total demand of 1.55 million units from: • Current Indonesia’s Housing demand positionover 15 million units, requiring approx. 750,000 units per year to be built in 20 year, • Housing needs from population growth is recorded at 800,000 units per year • Supply of New Housing Construction of approx. 240,000units in 2011 but still almost always below housing demand. • The big gap shows an opportunity for supply of new houses construction.

  12. OUTSTANDINGMORTGAGE PORTFOLIO & MORTGAGE TO TOTAL BANK LOANS RATIO • Source : Bank Indonesia, Dec 2012 Mortgage portfolio in Indonesia has grown rapidly for the last couple of years. At the end of 2012, outstanding mortgage portfolio is 222 trillion IDR. On the other hand, mortgage to total bank loans is still below 10% until at the end of 2012

  13. MORTGAGE MARKET SHARE • Source: The Indonesian Banking Statistics (SPI), Bank Indonesia (Central Bank of Indonesia), Dec 2012 More than 90% of mortgagesare originated by 10 banks as major playersuntil ‘Dec 2012

  14. HOME OWNERSHIP PAYMENT METHOD • Source : Bank Indonesia, Quarter IV 2012 80% of people who bought their houses in 2012 has used mortgage loan as their source of fund

  15. MORTGAGE LOAN TYPES In Indonesia, more than 86% mortgages are using mortgage loan (commercial), and the remaining 13% use the subsidized mortgages.

  16. SECONDARY MORTGAGE MARKET IN INDONESIA

  17. BACKGROUND OF DEVELOPMENT OF SECONDARY MORTGAGE MARKET IN INDONESIA • The government program: to provide decent & affordable houses for every Indonesia family. • It required the availability of housing development funds that more effectively and efficiently with sufficient mortgage volumes, sustainable and affordable, seen from accessibility to obtain house and affordable interest rates. • Mortgage is long term financing, so that required long-term funding from the capital markets to avoid maturity mismatch. • Therefore, the government established PT Sarana Multigriya Finansial (Persero) / “SMF”, that served to facilitate funds flow from capital market to the housing finance sector with securitization and liquidity facility

  18. ROAD MAP Catalysator 2018 2005 To Develop secondary mortgage market Facilitator To Buildand developsecondary mortgage market. • Liquidity Facility • Securitization • Securitization &Guarantor (Mortgage & RMBS) • Housing Finance Information System / HFIS Securitization-Guarantee HFIS Liquidity Facility Liquidity Facility Securitization Securitization Securitization-Guarantee HFIS

  19. THE COMPANY’S PROGRAMS • Securitization Program • provide a mechanism of sales of mortgage loans and issue of mortgage backed securities. • Liquidity Facility Program • provide medium to long term loans for mortgage lenders. • Guarantee Program • provide guarantee for obligation / mortgage backed securities issued by mortgage lenders. • Support Programs • - Provide a guidence and mortgage document standard • - Education and training programs • - Socialization (workshop, seminar, product introductions)

  20. SECONDARY MORTGAGE MARKET GROWTH Secondary mortgage market in Indonesia is conducted through securitization transaction and liquidity facility provided by SMF

  21. RMBS SUPPORTED BY SMF Ring-fencing • Bankruptcy Remoteness Credit Enhancement • Subordination (Junior Class) • Reserve Account • Servicer transition fund PRIME RMBS idAAA Assets Quality • 32 SelectionCriteria Payment Seniority • Principal payment will be pass through to RMBS class A (Senior Class) • Any lost will hit RMBS class B first Mortgage loans use as the underlying of RMBS issuance are selected to make sure its quality. The transaction structure also ensure that investment on senior class will be very secure through ring fencing, payment seniority and credit enhancement.

  22. RMBS ISSUANCE RMBS that has been issued and supported by SMF are rated AAA at issuance date and their current rating are also AAA. The AAA rating shows the quality of the mortgage portfolio that underlying the transaction.

  23. RMBS HOLDERS Current Position (Dec‘12) Variety of investors continues to invest in Residential Mortgage Backed Securities (RMBS)

  24. SMF BOND HOLDERS • Source: Indonesia Central Secuities Depository (KSEI), Desember 2012 56% of bonds that has been issued by SMF is hold by pension fund and insurance companies

  25. CONCLUSION • Indonesia’s economy continues to grow despite the global economy slowdown. Based ongross domestic product (GDP) growth, Indonesia’s economy grew 6,23% (yoy) in 2012.Since Inflation rate has been stable until December 2012 (4,30% yoy), Bank Indonesia decided to maintain the BI rate at 5,75%.  The government of Indonesia also realize that it is important to maintain macroeconomic stability, sustainable economic growth & political stability. • As the population grows,the needs for housing continue to rise and considering today national housing backlog as much as 15 millions units, 1,55 millions unit new houses should be built every year. It is critical for Indonesia to build a robust housing finance system to fulfill that needs. • Through strengthening the primary mortgage market and developing secondary mortgage market, availability of sustainable medium to long term fund will eventually increase affordability. • To develop the secondary mortgage market and to build investor confidence to invest in RMBS, SMF only facilitate prime RMBS with the highest rating. • The existance of secondary mortgage market is crucial to provide long term fund for mortgage lenders. To build and develop secondary mortgage market, it requires government and stake holders supports.

  26. HOUSING FINANCE IN INDONESIA • THANK YOU • PT SARANA MULTIGRIYA FINANSIAL (PERSERO) • Grha SMF • Jl. PanglimaPolim I No. 1, • Jakarta 12160, Indonesia • www.smf-indonesia.co.id

  27. Mechanismkanisme Transaksi Pembiayaan Sekunder Perumahan HAK TAGIH KPR SEKURITISASI EBA PASAR SEKUNDER PRODUKSI KPR PASAR MODAL PENYALUR KPR PEMBIAYAAN OBLIGASI INVESTOR AGUNAN KPR DANA OBLIGASI • PERAN SMF: • PENERBIT EBA (dalam proses) • PENATA SEKURITISASI, • PENDUKUNG KREDIT, • INVESTOR DEVELOPER DANA HASIL PENJUALAN EBA PERUMAHAN

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