Rental Rate Index as An Alternative Home Financing Price in Jabodebek-Banten

  • Denny Permatasari
  • Tika Arundina Aswin

Abstract

This study simulates an alternative benchmark for housing finance by using the Rental Rate Index (RRI) which can describe the true value of prices and rent. Today, Islamic banking still use interest rates as pricing benchmark in Musharakah Mutanaqisah (MMQ). By simulating Rental Rate Index in several cities in Indonesia as an alternative interest rate, we find that home financing pricing in every city can be different, depend on house index, rent-consumer index, and growth in both index year on year. For validation, we compare the simulation with instalment that exist in conventional banking and existing Islamic Banking. By using RRI, the value of financing instalments for each region can be different and each evaluation period does not always increase the value of the instalments but can also decrease according to real conditions on rental rates and house prices prevailing in the area (seen from the RHPI indicator and Rental Index). The reference for housing finance using RRI is considered more competitive with conventional financing, more affordable, and offers a best solution than the current MMQ rate.

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Published
2021-10-01
How to Cite
PERMATASARI, Denny; ASWIN, Tika Arundina. Rental Rate Index as An Alternative Home Financing Price in Jabodebek-Banten. International Journal of Advanced Research in Economics and Finance, [S.l.], v. 3, n. 3, p. 186-195, oct. 2021. ISSN 2682-812X. Available at: <https://myjms.mohe.gov.my/index.php/ijaref/article/view/15711>. Date accessed: 20 may 2024.
Section
English Section