Indonesia’s IDEAL takes the pain out of applying for mortgages – TechCrunch

Applying for mortgages is often a time-consuming and disorganized process that involves tons of manual paperwork. Based in Jakarta, IDEAL simplifies the process with a platform that allows users to compare mortgage products and apply to multiple banks at the same time. The startup announced today that it has raised $3.8 million in pre-seed funding led by AC Venture and Alpha JWC with participation from Living Lab Ventures and Ciputra Group.

The funds will be used for product development, discontinuation and expansion of its products. Eventually, IDEAL plans to add other key lending products and expand into more Southeast Asian countries.

Formed last year, IDEAL’s founding team includes Albert Surjaudaja, Ian Daniel Santoso and Indira Nur Shadrina, with Jeganathan Sethu joining this year. Before starting IDEAL, Surjaudaja was the former Head of Operations Strategy at digital payment service OVO.

IDEAL founders Albert Surjaudaja, Indira Nur Shadrina and Ian Daniel Santoso

Surjaudaja told TechCrunch that IDEAL “was started with the idea that consumer lending in Indonesia is broken.”

“When used responsibly, credit is a key factor in the growth of economies. It acts as a multiplier effect in value creation,” he added. “In light of this, Indonesia has one of the lowest credit-to-GDP ratios in the region, suggesting there is great economic value to be unlocked. There are a number of reasons for this, but a key reason is the lack of good, accessible options for renting products.”

Surjaudaja said traditional retail banks offer a relatively poor digital experience for their consumer lending products, making them less accessible. On the other hand, there are P2P lending and BNPL startups, but their products are focused on smaller, more consumptive lending.

“We feel there is a clear gap in the market, which is conventional, productive and larger consumer credit products offered on an easy-to-use digital platform,” he said.

Surjaudaja says IDEAL chose mortgages as its first consumer lending product because of its market potential, citing a 2021 Bank Indonesia research saying the country’s mortgage industry is worth $39 billion, with a projected annual increase Growth rate of 17% over the next five years. Gen Z and Gen Y are set to become the primary target audience in the home ownership sector.

Indonesia’s mortgage penetration rate is also just 3% of local GDP, one of the lowest in Southeast Asia.

Surjaudaja added that the traditional mortgage process is very manual, highly fragmented and takes a lot of time and effort from clients.

For example, most people lack information about how the mortgage process works, making it confusing. The document submission process is also manual and non-standard as multiple parties are involved and documents containing sensitive information are handled without security. According to Surjaudaja, consumers suffer from a lack of transparency on tariffs and the availability of various options, as well as an opaque application process that means they have to contact their agent multiple times.

IDEAL’s digital platform tries to solve these challenges. While mortgages are currently primarily suggested by real estate agents, IDEAL lets buyers choose their own mortgage products. It also has a feature called IDEAL Checking that allows people to check their credit scores instantly.

It helps users choose a mortgage by calculating costs and rates, and also includes a direct application system that allows users to apply to multiple banks with one record and real-time tracking system. According to IDEAL, its digital system is secure and minimizes human error and data leakage that often occurs with paper-based or messaging app-based mortgage processes.

Other features include detailed information about real estate units from IDEAL’s development partners, various mortgage products from banks and IDEAL Compass, a short questionnaire that helps the platform understand what a customer needs and creates a simulation of monthly payments, terms and other information about a mortgage .

The startup is currently focused on marketing primary housing but plans to expand into secondary housing and mortgage refinance/acquisition products. It will also launch a dashboard to help users monitor and manage their mortgages. IDEAL also plans to expand into other key lending products, with a long-term vision to enter additional Southeast Asian markets such as Thailand, the Philippines and Vietnam.

Surjaudaja said that 60% to 70% of the Indonesian mortgage market falls under the second home category. “Our market research shows a strong need and demand from Indonesian consumers for a way to easily assume/refinance their current mortgage as the gap between fixed and variable mortgage rates in Indonesia can be quite large,” with up to a 10% difference .

IDEAL monetizes through commissions from banks and developers for each successful loan application through the platform. It currently has partnerships with five banks including CIMB Niaga, OCBC NISP and Maybank and several of Indonesia’s largest real estate developers such as Sinar Mas Land, Ciputra Group and Agung Sedayu Group. The platform connects to banks via APIs to simplify the data collection process.

Some of IDEAL’s competitors are Pinhome, Cermati and Cekaja. According to Surjaudaja, Pinhome’s business model is more real estate-focused, offering an end-to-end real estate solution, from home finding to home financing. On the other hand, he describes IDEAL’s business model as “customer-centric” and more in the direction of fintech rather than proptech. Cermati and Cekaja are financial aggregators that allow users to browse mortgage products from multiple banks, but Surjaudaja said they’re not fully digital, don’t provide contextual data, and still require an online-to-offline process with no prior credit assessment-checking and pre-filtering of bank applicants.

In a prepared statement, AC Ventures Managing Partner Adrian Li said, “Indonesia’s mortgage penetration currently stands at 3% of local GDP. That’s low compared to Malaysia and Singapore, which are 30% or more. This represents a $30 billion opportunity if Indonesia can double its mortgage penetration to 6% through improved access to finance. IDEAL’s strong team identified a bottleneck in the mortgage industry and brought fintech and real estate expertise to build a one-stop mortgage shop in Indonesia.”

Indonesia’s IDEAL takes the pain out of applying for mortgages – TechCrunch Source link Indonesia’s IDEAL takes the pain out of applying for mortgages – TechCrunch

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