Performance Indonesia's One Million Houses Program Better in 2017?
Indonesia's Public Works & Housing is hopeful that the government's One Million Houses program will be more successful in 2017 supported by the 13th economic policy package that aims to ease red tape surrounding the construction of low-cost housing for the poorer segments of Indonesian society as well as high demand for property due to improving purchasing power amid low inflation and accelerating economic growth.
The One Million Houses program is one of the government's strategic projects. Through the program, launched in mid-2015, the government aims to provide adequate housing facilities to the low income citizens and address the backlog or shortage of houses in various regions across Indonesia. In order to make these houses affordable the government set very low down payment obligations for the purchase of houses under the program. It also subsidizes part of the purchase (subsidized mortgages) and eases administrative requirements for the low-income buyers. The One Million Houses program is designed to alleviate Indonesia's housing backlog from 11.4 million houses in early 2016 to (a targeted) 6.9 million by 2019.
Recently, Indonesian Coordinating Minister for Economic Affairs Darmin Nasution said about 11.8 million Indonesian families still do not own a house and are in fact likely to remain tenants for the rest of their lives unless the government lends a helping hand.
The One Million Houses program requires total investment up to IDR 67.8 trillion (approx. USD $5 billion). The program is financed through the state budget (IDR 8.1 trillion), the BPJS employee social security program (IDR 48.5 trillion), the Housing Savings Advisory Board for Civil Servants known in Indonesia as Bapertarum-PNS (IDR 3.1 trillion), state insurance firm Taspen (IDR 2 trillion), state house developer Perum Perumnas (IDR 1 trillion), and the housing loan liquidity facility (IDR 5.1 trillion).
In the 13th economic policy package, launched by the government in late August 2016, unnecessary bureaucracy is curbed, implying that both time and costs drop significantly for developers (and therefore makes investment in low-cost housing more attractive). This should also result in lower property prices for the end-consumer.
The One Million Houses program has not been running smoothly so far due to regulatory and land issues (for example the limited availability of land bank). Indonesia's Ministry of Public Works and Housing announced that until June 2016 around 120,000 housing units have been constructed under the program. Meanwhile, the budget of the ministry for the program has been raised to IDR 15.6 trillion in 2017 (up from 12.4 trillion in 2016).
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