Bad Debts: Distressed Assets Overwhelm Indonesia's Property Market

Surge in Seized Property Supply Drives Market Dynamics: The escalating influx of seized properties flooding the market is a phenomenon that has yet to subside, injecting dynamics into the property market this year. Home prices continue to rise amid this surge of seized property sales.

Decreasing Loans Quality: More Collateral Executions on the Horizon: The number of loans with decreasing quality still grows significantly. As of September 2023, the surge in loans categorized under collectability 2, 3, and 4 is alarming, with growth ranging from tens to hundreds of percent in several major banks. Trillions of rupiah in foreclosed collaterals were recorded by some of them.

Companies in the Web of Bankruptcy Fillings: Bankruptcy petitions have surged, surpassing 500 annually since 2020. According to data from the Indonesia Stock Exchange (IDX), 25 listed companies bear a special notation indicating there is a bankruptcy or Suspension of Debt Payment Obligations filing, cancellation of peace request, or in bankruptcy conditions.

The Journey of Hard-to-Sell Assets: Numerous banks are strategically employing the asset swap scheme to promptly address the challenge of high bad loans, especially those that are substantial in loan value but hard to recover.