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00:00 Hi, welcome back to C3 Business. State-owned PT Bank Tabungan Negara,
00:06 best known for providing house mortgage loans, recorded a positive performance
00:11 in its Syariah business unit, BTN Syariah.
00:15 BTN Syariah posted a net profit of 702.3 billion rupiah in 2023,
00:24 up 110.5% compared to the previous year.
00:30 BTN explained that the surge in BTN Syariah's business was triggered by a trend in the community
00:36 that's seeking home financing with Syariah contracts.
00:40 The highest demand occurred in areas with the largest Muslim population,
00:44 such as Aceh, West Java, West Sumatra and West Nusa Tenggara.
00:50 As the end of December 2023, subsidized Syariah mortgage products contributed 61%
00:58 to the total financing disbursed by BTN Syariah, reaching 22.9 trillion rupiah.
01:05 Meanwhile, non-subsidized mortgages contributed 31.3%, reaching 11.6 trillion rupiah.
01:14 Now to talk more about our guide to Syariah-compliant mortgage,
01:23 today joining me in the studio, Islamic finance specialist, another Alia in the studio,
01:27 Alia Natasha, thank you for coming by, for dropping by at C2A Business Studio.
01:31 Okay, happy to be here.
01:33 Yeah, so Alia, we know that there's a lot of people, at least they're curious
01:38 and demanding to seek mortgage that is compliant to the Syariah law.
01:43 So, is Syariah financing easier to get, easier to obtain compared to the conventional mortgages?
01:48 As we see in the financial banks for the last five years,
01:52 we see there is a surge demand for the Syariah finance products,
01:57 not just for mortgages, but for savings and for many things.
02:01 Because we've seen there's the rise of people who are embracing Syariah finance into their lifestyle.
02:08 So, and nowadays as we see, since Bank Syariah Indonesia,
02:15 the biggest Syariah banks in Indonesia has a wider access in all many of the cities
02:24 and we can see the access to the Syariah financing mortgages, it's very easy.
02:30 Alright, what I know is that it's actually avoiding the rates.
02:35 Okay.
02:36 Yeah, right. So, let's say I'm getting a house which is worth 500 million rupiah for my future home.
02:44 So, how much money do I need to prepare for the Syariah mortgage?
02:47 So, in the Syariah mortgages itself, we have the three concepts that can define which of the concepts we would like to have.
02:57 The first one I would like to say is the concept of a murabaha.
03:01 Okay, if you have a 500 and then, and the house itself is sold as a 500 million,
03:08 we agree on the profit, the bank will have a profit, not an interest.
03:14 So, if the bank say, okay, we will buy this house 500 million, but as a profit for the banks,
03:21 let's say, an additional 100 million and then the price house is a 600 million.
03:27 Okay, so that depends on how long would the mortgage be.
03:30 Like, let's say you're taking a 15 year or a 20 year.
03:33 Yeah, the installment will depend on how much monthly you pay.
03:38 And then we go to the second term called the musyarakah mutanakisah.
03:42 This is the very conventional ways that I can explain about the mortgages.
03:47 There are still the down payment, like 20%.
03:51 So, we need to prepare 100 million and then the bank borrow at lending the 400 million.
03:58 But whenever I pay the installment, okay, and then the ownership release the shares.
04:05 So, it's like profit, it's not sharing.
04:07 Yeah, yeah. So, at first, I only have a 20% of the shares of the house and then you as a bank have like 80%.
04:15 And by the time you'll get full ownership of the house.
04:17 Yes. So, maybe we agreed for the 10 years, 10 years of periods of mortgages.
04:23 And then by the 10th year, you will have zero shares as a bank and I have a control 100% of home ownership.
04:31 Okay. Well, I saw some news out there as well in Indonesia and maybe in other countries.
04:37 Some people are reluctant to have or to get this mortgage because they say it's more expensive.
04:43 Is that true?
04:44 To be honest, yes. The Sharia mortgages is a little bit pricier than the conventional one.
04:53 It's because we have a different cost structure compared with the traditional ones.
04:59 Where that I said, we have a concept like Ijara, Murabaha, Musharaka, which are very different than the conventional.
05:09 Yeah. While for the long term itself, it has a really good benefits.
05:15 But in the beginning of the period, we have a higher cost of setting up the contract.
05:22 The agreement that we need to agree upon on the very beginning.
05:28 But if you want to take the Sharia, it backs again into your life and believe other Islamic principles.
05:36 It's nothing about the cost itself because in the long run, it might have a cost effectiveness higher than conventional one.
05:45 Why? Because in the Sharia mortgages contract, we agreed in the very beginning.
05:52 Despite maybe in the future, there will be market volatility, increase in inflation rates or interest rates.
05:59 No. We agreed on what we need to pay every month, which gives us a peace of mind, especially during financial hardships.
06:09 Well, usually the conventional way they do, fixed in the beginning and then floating in the end, which is quite big in its interest rates itself, right?
06:18 Yes.
06:19 Conventional financing offers low rate to start with though.
06:22 So, what's the danger and how can Sharia financing help to avoid those dangers?
06:27 Okay. The Sharia financing can help within the transparency and the cost effectiveness that I mentioned before.
06:35 There is no additional charge. Everything is transparent. Everything is written in the agreement.
06:41 So, there is no hidden surprises.
06:43 Right.
06:44 And from the very beginning of the agreement, the ownership are the borrower, not the banks.
06:51 Right.
06:52 It's different than the conventional ones. Maybe one day, if you cannot pay the installment, the banks have the rights to take your home.
07:02 Okay. So, what happens then if we are failing to pay our monthly installment as we agreed in the beginning?
07:10 Okay.
07:11 And then we feel maybe there is an economic hardship or something like that. What happens?
07:14 First thing, we can restructure it, asking for extension of a period of time and then make the installment lower than the previous one.
07:24 But in exchange, we have to pay in the long-term period.
07:28 Right. So, that's upon the agreement between you and the bank?
07:31 Yes.
07:32 All right. So, what's the rules of renting now or making money from Sharia investment?
07:38 Because in the Islamic way, we are not allowed to get profit from the money of renting.
07:45 Okay. In Islamic, it's permissible. It's okay to rent your house while you are still paying as a mortgage.
07:54 It is okay. As long as you as a landlord and as a tenant know what you are bringing to.
08:02 Okay.
08:03 So, we need to make a very clear and transparent communication telling the tenant that actually this is still on the mortgages and how much they are willing to pay.
08:12 So, is everything written clear?
08:14 Yes.
08:15 And we agreed on the price that we have to pay as a tenant for annual, monthly, and it's okay.
08:22 Okay. It's permissible.
08:23 It's transparent and clear.
08:24 What prohibits is taking the interest as… Yeah. What prohibits is the interest rate, not taking profit. Profit sharing is…
08:35 It's fine.
08:36 Yeah. It's fine.
08:37 Okay. So, if you still have an outstanding balance in the Sharia mortgage and we would like to sell the property, so how is the stance going to be like?
08:49 Usually, when the house is sold and then we just have to pay all the…
08:57 The remaining…
08:58 Yes. The remaining balance to the bank as we agreed upon.
09:02 Because the Sharia already agreed on how much the house is valued on the very beginning.
09:10 So, if you have the profit, you can keep it to yourself as long as you pay agreed the price that you are willing to pay at the very beginning of the active mortgages.
09:21 Okay. How do the Sharia mortgages compared to the conventional mortgages in terms of interest rates and total costs?
09:30 At the end of the day, the bank doesn't want to not have any profit at all, right?
09:34 And also as the customer, we also want to get the best sort of like installment scheme.
09:41 Yeah. To be honest, in reality, most of Indonesian are taking conventional mortgages because they want to secure lower costs.
09:52 But the one who wants to take the Sharia mortgages, they believe in the blessing itself by having a Sharia financial principles.
10:03 So, the cost should not be an issue for the people who wants to take the Sharia way.
10:09 I know maybe it is a slightly costly, but we cannot against our belief and principle when it comes to Sharia way.
10:20 And for those who wants to take a hijrah financial, some of them will release their conventional mortgages and change it into a Sharia mortgages just to have a blessing.
10:32 Right.
10:33 As a Sharia financial teach us to have a blessing in everything of what we are doing, including our financial transactions.
10:42 So, what are the difference between the conventional and Sharia mortgages in terms of requirements when we are about to apply for the home mortgages?
10:52 Usually, it's the same.
10:54 It's the same?
10:55 It's the same.
10:56 So, they will have to check your balance?
10:58 Your balance, bank account, and then your history of relationship in the bank, your salary sleep, and everything to check are you okay to receive the loan from either conventional or Sharia.
11:15 Just the difference is the offer from the banks.
11:19 The installment from a Sharia bank might slightly bit higher than the conventional ones.
11:25 But the conventional ones might give you only fixed rate for the very first few years.
11:32 Let's say, first five years, you might have a fixed rate for 7%.
11:37 But after six years and above, there will be a floating rate.
11:41 Oh, so that's also possible?
11:43 Yes.
11:44 It has happened in the conventional.
11:46 While in Sharia, if we agree in 8%, so it's going to stay 8% of the installment rates that we need to pay for maybe 10 or 20 years.
12:00 There's no changes of everything.
12:02 So, it gives us a little bit financial security.
12:05 You know what to expect at least.
12:07 Yes.
12:08 And full of blessing, hopefully.
12:09 Hopefully.
12:10 Alia and Natasha, thank you so much.
12:11 Islamic finance specialists.
12:14 Thank you for coming by to see today.
12:16 Thank you.
12:17 All right, we're going for another break.
12:19 And when we return, our daily recap from stock market.
12:22 You don't want to miss that.
12:23 We'll be right back.
12:24 Stay tuned.
12:25 [Music]