Indonesia’s property sector is undergoing a sustained boom in demand supported by a growing population, increasing purchasing power and the commercial development of second and third tier cities. Mortgage penetration in Indonesia remains low at 2.8% of GDP presenting exciting opportunities for further growth. In line with the Indonesian government’s scheme to encourage home ownership through the availability of mortgage financing, Bank Muamalat forged an alliance with the Ministry of Public Housing in 2012 in order to channel funds from the Housing Finance Liquidity Facility to strengthen its position in the shariah compliant mortgage sector that is witnessing a sharp rise in demand.

The Muamalat iB Mortgage is a centrepiece product of the bank’s reoriented shariah retail strategy accounting for 45% of total consumer financing. The product provides shariah compliant mortgage financing for both residential and commercial property of up to 25 billion RP paid back over 15 years in fixed instalments which has proven highly popular among first time buyers. Customers can also choose the form of contract they wish to take from murabaha (sale-purchase) or mutanaqishah musharaka (partnership lease) according to their specific preferences and principals.

Through the effective streamlining of administrative procedures to reduce approval times, successful promotional campaigns and by cultivating partnerships with leading property developers in Indonesia, Bank Muamalat recorded a 30% growth in mortgage financing in 2012. The bank’s success in shariah mortgages is set to continue as Indonesia’s consumer confidence remains buoyant and continues to spur property purchases and mortgage financing.