Which Indonesian Home Purchasers Seek Mortgage Finance.pdf

Which Indonesian Home Purchasers Seek Mortgage Finance.pdf...

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135 Indonesia Home Purchase Finance I NTERNATIONAL R EAL E STATE R EVIEW 2009 Vol. 12 No. 2: pp. 135 – 156 Which Indonesian Home Purchasers Seek Mortgage Finance? Raymond J. Struyk * National Opinion Research Center, Bethesda, MD; NORC, 4350 East-West Highway, Bethesda, MD, USA; Email: [email protected] . Nilesh Patel Department of Sociology at the University of Chicago, Chicago, IL The incidence of taking a mortgage loan from a commercial bank or cooperative for home purchase is sharply lower in developing than industrialized countries. Indeed, the common approach for achieving good quality housing is for a family to construct and improve a dwelling over a number of years. At the same time, it may be possible for formal lenders to expand the volume of mortgage lending by marketing mortgage loans better tailored to those more prone to seek them. This analysis is based on a representative survey of households intending to purchase a dwelling in the next three years with a final sample size of 1,281 conducted in 2008 in Indonesia’s seven largest metropolitan areas. We find that those more likely to seek such loans are families who already have an established relationship with a bank or cooperative, professionals and those with higher permanent incomes, and those with greater knowledge of mortgage loans. These factors all contain important ideas to assist lenders in targeting mortgage lending marketing campaigns. Keywords Mortgage; Housing finance; Developing countries; Southeast Asia * Corresponding author
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Struyk and Patel 136 1. Introduction In industrialized countries, the ability to borrow funds to finance housing investment is generally a key determinant of whether a family can afford to become a homeowner. Formal housing finance, i.e., mortgage loans provided by regulated institutions, plays an extremely important role in actualizing potential housing demand. Competition among lenders is keen to offer loan products that meet client preferences. 1 On the other hand, in developing nations, while formal finance sometimes plays a significant role, it is often not the primary means of realizing adequate housing. Rather, incremental unit construction financed through savings or short-term borrowing is typically the dominant path to eventually obtaining a unit of minimum acceptable quality. Without access to formal finance, households who wish to purchase a completed good quality home with a clear land title must wait until they have amassed sufficient savings by themselves or obtained a loan from members of their extended family, friends, or a developer (installment sales involving a large downpayment during the construction period and installments beginning during this period and continuing for several years after completion with the owner holding the title until all payments are made). The problems with non mortgage finance are that not everyone has access (e.g., a family member who has the capital to make the loan or an employer who will do so), the cost of funds is often high, and in the case of
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  • Spring '18
  • Mortgage loan, fixed rate mortgage, Indonesia Home Purchase Finance, home purchase finance

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