Higher interest rates impact developer decisions more than housing demand in Jakarta

Developers turn more cautious as higher interest rates reshape project planning.

Higher interest rates are prompting Jakarta apartment developers to adopt a more cautious approach to new projects, although housing demand remains broadly resilient, according to Colliers.

The consultancy said the recent increase in Bank Indonesia's policy rate is having a greater impact on developer strategy than on buyer demand. Rather than accelerating expansion, many developers are focusing on selling existing inventory, strengthening pre-sales and preserving financial flexibility before launching additional projects.

Colliers said mortgage affordability is likely to come under greater pressure during the second half of 2026 as commercial banks gradually adjust lending rates. However, government support measures, including the VAT incentive (PPN DTP) for ready-stock units and the proposed extension of mortgage tenors to up to 40 years, should help maintain affordability, particularly for first-time buyers and owner-occupiers.

According to Colliers, the proposed longer mortgage terms could reduce monthly repayments and improve housing affordability, although the eventual market impact will depend on implementation details and individual bank lending policies.

The report also highlighted the continued importance of financing partnerships. State-owned banks remain the dominant mortgage providers due to their participation in government housing programmes, while private banks continue to offer more tailored financing solutions.

Colliers said higher interest rates are not fundamentally weakening Jakarta's apartment market. Instead, tighter financing conditions are encouraging developers to become more disciplined, accelerating the market's transition from expansion-led growth towards inventory optimisation, stronger capital allocation and more selective project launches.