The Effect of Debt Service Ratio (DSR) on Home Ownership Financing Approval

Abstrak

Ideally, financial institutions in assessing the feasibility of a Mortgage Loan (Kredit Pemilikan Rumah/KPR) should not rely solely on a single indicator such as the Debt Service Ratio (DSR), but should also take into account other qualitative factors that reflect the borrower’s repayment capacity more comprehensively. A holistic approach is necessary to improve access to financing, especially for individuals with non-conventional financial profiles. However, the reality in Indonesia shows that the majority of financial institutions still treat DSR as an absolute threshold in the KPR approval process. As a result, prospective borrowers who have potential repayment ability but possess a DSR slightly above the limit tend to face rejection. This study aims to analyze the influence of the Debt Service Ratio on the approval rate of mortgage financing in Indonesia, by measuring the strength of the relationship and the contribution of DSR in explaining the variation in mortgage loan approvals. The research employs a quantitative approach with regression and correlation analysis based on official secondary data from the Financial Services Authority (OJK) and related institutions during the period 2019–2023. The findings indicate that DSR has a negative and significant effect on the approval rate, where every 1% increase in DSR may reduce the approval rate by nearly 3%, with DSR explaining approximately 68% of the variation in KPR approvals. These results affirm the strategic role of DSR as a primary instrument in the credit evaluation process. Nonetheless, the need to reformulate a more inclusive credit assessment approach becomes essential so that access to housing finance can be enjoyed more fairly and sustainably.