Mortgage fintech: Indonesia’s next big consumer lending space

Indonesia’s newest fintech platforms are going after bigger-ticket transactions: homes.

Digital mortgage platforms like Pinhome and Ideal are tackling the country’s fragmented and opaque mortgage application process, and have attracted keen VC interest.

Photo credit: 123rf / snaptphotography

Full-stack proptech firm Pinhome has raised US$75 million from investors including Ribbit Capital, Insignia Ventures Partners, and Iterative Capital. Meanwhile, Ideal and Tanaku have bagged US$3.8 million and US$5.5 million and in pre-seed funding, respectively.

By all counts, the opportunity is huge: Indonesia’s mortgage penetration rates are abysmally low. Its mortgage-to-gross domestic product (GDP) ratio – a measure of mortgage penetration – hovers between 2% to 3%. Among the productive age population, home ownership in the country is less than 20%, Pinhome founder and CEO Dayu Dara Permata notes.

In comparison, the ratio household debt to GDP in Singapore was 70% in the third quarter of 2021, with mortgage loans comprising around 70% of household debt.

For banks, mortgage loans are also a big business that’s growing. Bank BCA, one of the largest in Indonesia, had US$10 billion in outstanding consumer loans in March 2022. Of that amount, 63% is made up of housing loans, indicating a 9.8% year-on-year growth.

That said, the concept isn’t new among startups. Financial comparison sites like Cermati and CekAja have previously distributed mortgage products on top of credit cards, though both platforms have ceased offering the former.

Players like Dekoruma and 99 Group, which operates in Indonesia through its Rumah123 and 99.co platforms, also connects prospective homeowners to its bank partners.

But some of these startups are putting a new spin on the mortgage scene. Tanaku, for one, is focused on affordability: Users can pay just 2% of their down payment before moving into the home within 48 hours.

For digital mortgages, the most mature company in the space is perhaps Pinhome, which is a property portal, mortgage platform, and home services marketplace rolled into one. It has seen “double digit” growth in its topline month-on-month since its founding in 2019, according to Permata, who spearheaded Gojek’s GoLife unit before establishing Pinhome.

Entering a “black box”

Each player has their own approach, but there’s one thing they can agree on: Kickstarting the mortgage application process is akin to entering a black box.

“It requires luck,” Ideal co-founder and CEO Albert Surjaudaja says. Working with an experienced banker or property agent might create a good experience, but otherwise, the process can be “inconsistent, slow, inefficient, and ineffective.”

Solving for affordability

“Very different” end points

Which model will prevail?