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Indonesia Struggles With 13.5M Housing Backlog

Indonesia’s government is struggling to tackle the country’s housing backlog of 13.5 million units as it has only been able to supply 50 to 62.5 percent of the total annual demand, reported the Jakarta Globe.

After President Joko Widodo was elected in October 2014, he promised to build one million homes to address the yearly demand of about 800,000 new units arising from urbanisation and population growth.

However, the authorities have only been able to provide 400,000 to 500,000 units every year since Mr Widodo came into power, according to Public Works and Housing Minister Basuki Hadimuljono.

“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.

Another issue is that 64 million Indonesians are categorised as belonging to low-income families, meaning they cannot afford to purchase their own homes. Even though 20 percent of them can purchase a house outright, 40 percent require government subsidies to buy a house, while the remaining 40 percent need to take out mortgages.

“Still, even the government’s budget for housing is not enough to cover (the requisite amount) as it only encompasses one percent of total government spending,” noted Basuki.

Making matters worse is that most of the population works in the informal sector with low financial literacy and limited access to financing. “The relatively high interest rate is also a stumbling block as mortgages have become more expensive,” he added.

–PROPERTYGURU

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