Encourage 3 Million Houses, Subsidy Scheme Proposed to Change

Solving the housing shortage problem is considered to require changes to the financing scheme.

KOMPAS/PRIYOMBODO

The atmosphere in the subsidized housing environment in Cibunar Village, Parung Panjang, Bogor Regency, West Java, on Monday (2/19/2024). The government has cut subsidized housing assistance through the housing financing liquidity facility in 2024 to 166,000 units, a decrease of 24 percent from the target of 220,000 units in 2023.

LABUAN BAJO, KOMPAS — The elected president-vice presidential pair for the 2024-2029 period, Prabowo Subianto-Gibran Rakabuming Raka, promised a construction program of 3 million houses per year. In order to achieve this ambitious target, the housing subsidy scheme is proposed to change.

Chairman of the Central Management Board (DPP) of Indonesian Real Estate (REI) Joko Suranto stated that the housing sector has a major contribution to economic growth. However, efforts to resolve the housing shortage (backlog) in Indonesia tend to be slow. Over the last decade, the number of housing shortages in Indonesia has only fallen by 10 percent.

In 2020, a total of 13.6 million families were recorded to not have a house. Meanwhile, in 2022, the number of families without a home is 12.7 million or 20 percent of the total number of families.

Meanwhile, the rate of increasing housing needs per year is approximately 600,000-800,000 units in line with the growing number of new families. In 2035, the population in Indonesia is estimated to reach 304 million, with 60 percent of them residing in urban areas. Quick, easy, and light housing access is needed to address the problem of housing shortages.

Also read: Prabowo's promise to build 3 million houses per year faces the reality on the ground

He believes that the program to provide 3 million houses requires the commitment of all parties. By 2024, REI has prepared 600,000 land plots, estimated to be sufficient for providing 1 million houses in urban areas.

”The same method of solving (backlog) will not be able to result in a significant reduction in the house backlog. "We need changes to the housing subsidy scheme that are more effective," said Joko on the sidelines of REI's 52nd Anniversary celebration in Labuan Bajo, West Manggarai Regency, East Nusa Tenggara, Friday (26/4/2024).

Expanded reach

Joko admitted that it was necessary to shift the pattern of housing financing liquidity facilities (FLPP) to interest difference subsidies. The FLPP budget is put into an endowment fund and invested. Endowment fund investment results will be combined with other funding sources to finance the interest difference subsidy. The endowment fund mix is ​​considered to be able to support the financing of subsidies for 3 million houses.

Permanent funds are also considered to be able to utilize other sources of funding, such as the Social Security Administration (BPJS), the Hajj Financial Management Agency (BPKH), and endowment funds placed in banks to become complementary funds for subsidizing interest rate difference financing.

The same sentiment was expressed by Hirwandi Gafar, the Consumer Director of BTN. The new government has promised to provide an allowance of 3 million houses in one period, or triple the amount compared to the current period, which consists of 1 million housing units. The increasing number of houses to be built indicates a larger budget subsidy needed compared to the previous period.

Also read: Overcoming 12.7 Million Housing "Backlog"

To expand the reach of financing, they have proposed to the government to review the definition of low-income communities (MBR). This is because those who fall under the category of moderately well-off (MBT) with a monthly income above Rp 8 million also have limited purchasing power to access housing.

"We propose that the income category eligible for subsidies be expanded to Rp 12 million or Rp 15 million. The proposed financing scheme is being discussed together with the Ministry of Public Works and Housing and the Ministry of Finance," said Hirwandi.

Furthermore, Hirwandi stated that the subsidized home ownership credit tenure (KPR) is proposed to be limited to 10 years, and the rest will follow the market interest rate. This is due to the increasing income of the community over a decade. The public tends to pay off their installments on average after entering the 10th year, even if the tenure taken is longer.

KOMPAS/HERU SRI KUMORO

A row of newly built houses that are almost completed in Cibunar, Parung Panjang District, Bogor Regency, West Java, on Thursday (19/1/2023). Hundreds of houses built in this area are subsidized government homes with mortgage programs.

Interest difference subsidies

Until now, the government has implemented the FLPP scheme for low-income people with a fixed interest rate of 5 percent per year and a term loan of up to 20 years.

Director Main PT Bank Tabungan Negara (Persero) Tbk Nixon LP Napitupulu said that the financing scheme is still under discussion with the housing finance ecosystem. BTN proposes that financing should not only rely on the State Revenue and Expenditure Budget (APBN) considering that the 3 million house program targets three times as many houses to be built compared to the previous period.

"If we use the FLPP method, it will definitely be burdensome. FLPP relies on all its liquidity needs being provided by the state budget. There must be other breakthroughs so that government budgets can be more sensibly absorbed. We propose a scheme in the form of a combination of FLPP and interest rate subsidies," he said in a press conference outlining BTN's performance in the first quarter of 2024, in Jakarta on Thursday (25/4/2024).

The scheme is carried out by placing the FLPP budget, which ranges from IDR 19 trillion to IDR 25 trillion annually, as a perpetual fund to be managed by the People's Housing Savings Management Agency (BP Tapera). Then, the perpetual fund can be placed in long-term government debt instruments.

Nixon explained that the returns from such investments will be used to cover the needs of housing subsidies with differential interest subsidies. With a return of 6 percent, for example, the FLPP budget can finance around 250,000 housing units per year.

Nixon added that his party also requested for the widening of the price limit for subsidized housing, from the previous range of Rp 180 million to Rp 190 million per unit to Rp 300 million to Rp 500 million per unit. This way, at least communities can get houses that are relatively more decent than before, from type 30 to type 36.

The increase in the selling price limit will make the range of subsidies wider. "As long as it is for a first home, we propose it like that. If this happens, the reach to the community will be greater. But the quality of housing also needs to be considered, while the new government is in power," added Nixon.

Also read: Demand for mortgages in 2024 is expected to increase