Indonesia Faces Uphill Battle to Ease Housing Backlog


DECEMBER 30, 2015

Jakarta. Slightly more than a quarter of Indonesia's 250 million population have little to no financial capabilities to buy their own houses, Public Works and Housing Minister Basuki Hadimuljono said recently, reflecting the uphill battle the government faces in its quest to clear out the country's housing backlog.

Basuki said that 64 million Indonesians were categorized as low income. Of this figure, 20 percent are able to buy a house outright, 40 percent can buy houses but only with a government subsidy, and the remaining 40 percent resort to taking out loans.

"Still, even the government's budget for housing is not enough to cover [the requisite amount] as it only encompasses 1 percent of total government spending," Basuki said in Jakarta recently.

Adding to the pile of challenges, the lion's share of the population works in the informal sector, giving them limited access as well as financial literacy to secure housing mortgages, according to the minister. "The relatively high interest rate is also a stumbling block as mortgages have become more expensive," he added.

Housing gap remains

Indonesia currently faces a backlog of 13.5 million housing units, a number which is likely to keep growing as demand for some 800,000 new units pops up every year due to urbanization and population growth.

In attempt to address the backlog, President Joko Widodo pledged  to build one million houses every year when he came into office in October last year.

Since then, however, the government has only been able to supply between 400,000 and 500,000 homes every year, according to the housing minister. "There's still a gap of 400,000 units every year, which, if we don't take care of the issue quickly, will cause the backlog to increase more and more," he said.

Among the ministry's five-year plans is a program to build up to 50,000 special housing units and 550,000 low-end leased apartments. It also aims to provide some financial assistance for lower-income households.

It is now drafting three regulations aimed at narrowing the housing gap, among which is a subsidy for Indonesians to start living in low-cost apartment buildings in order to conserve productive farming areas, according to Maurin Sitorus, the ministry's director general of housing financing. Another regulation is expected to increase the role of state housing firm Perum Perumnas in offering residences for lower-income buyers.

Meanwhile, the Indonesian Association of Realty Developers (Apersi) targets to build up to 120,000 housing units next year, up 71 percent from this year's target of 70,000 housing units, according to the association's chairman, Eddy Ganefo. He said that about 100,000 housing units will be for lower-income consumers, or roughly 83 percent of the total target.