Which Indonesian Home Purchasers Seek Mortgage Finance.pdf

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

Info icon This preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
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
Image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
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
Image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern