Indonesian Government Extends VAT Incentive for Housing

Policy Extension to December 2026

The Indonesian government has announced the continuation of the 100% Value-Added Tax (VAT) incentive on home purchases, effective until December 2026. This decision, outlined in the Minister of Finance Regulation No. 90/2025, demonstrates the government's commitment to supporting both the property sector and broader economic growth.

Key Details of the Incentive

1. Eligible Properties: The incentive applies to both landed houses and apartment units
2. Price Threshold: The maximum property price eligible for the incentive remains at Rp 2 billion
3. Implementation Period: The policy is valid through December 2026
4. Rationale: The government aims to maintain economic momentum and support affordable housing

Economic Rationale and Impact

The extension of this incentive is part of the government's economic stimulus package, designed to maintain Indonesia's economic growth trajectory. By eliminating VAT for eligible home purchases, the government aims to:

1. Stimulate Property Demand: Making homes more affordable for middle-income buyers
2. Support Developers: Helping maintain construction activity and related industries
3. Boost Economic Activity: Through multiplier effects in the property and construction sectors

Market Implications

This policy is expected to have a positive impact on both the property market and overall economic activity. The housing sector, being a significant component of Indonesia's economy, will likely see increased demand, particularly for properties priced below the Rp 2 billion threshold. The continuation of this incentive provides certainty for both buyers and developers, potentially leading to increased transactions and new project launches throughout 2026.