From Uniform to Targeted: Redesigning LTV Policies through Experimental Approaches in Emerging Housing Markets

Abstract This study examines whether regionally targeted Loan-to-Value (LTV) policies can better manage credit risk and housing affordability than Indonesia’s current uniform approach. Using a staggered Difference-in-Differences design with simulated policy shocks on 17 provincial panels (2012–2024). Provinces are classified into two groups: a "high-risk" group for LTV tightening (based on peak non-performing loans) and a "low-growth" group for LTV relaxation (based on severe credit contraction). Results show an asymmetric effect: LTV tightening in high-risk provinces reduces mortgage distribution by 16.3%, while relaxation in low-growth areas has limited impact. The main conclusion is that a shift from a uniform to an adaptive, regionally-differentiated LTV framework can enhance financial stability by proactively containing regional credit bubbles. This study provides a methodological blueprint for simulating macroprudential policies and offers clear evidence for Indonesian regulators to design more responsive and equitable housing market regulations.