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Analysis: Tapera Law: Government's effort to curb housing problem
Source : KemenperaThe government officially passed the Public Housing Savings (Tapera) bill into law in February 2016
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Source : Kemenpera
The government officially passed the Public Housing Savings (Tapera) bill into law in February 2016. The law is one of the government's efforts to curbing the huge demand for housing. The law, an amendment of the previous Law No. 1/2011 on Housing and Housing Area, is aimed at reducing the backlog of housing that is still unattainable especially for low-income people.
Developers have so far not been able to meet the need for housing. According to the Indonesian Real estate Association (REI), the developers can only build 300,000 to 400,000 houses annually. Similarly, according to the Public Works and Public Housing Ministry, the supply is still below the annual need of 800,000 houses. It will be a bigger housing backlog which by 2014 has recorded 15 million units, especially for houses intended for those on the poverty line (or low-income people, MBR).
Low-income people makes up tens of millions of people so the government policy needs to address their housing needs.
One of the government's policies to relieve the large need for housing is through the housing loan liquidity facility (FLPP). The facility allows those with income below Rp 4 million to propose for a housing loan with low interest and an affordable down payment.
FLPP was launched in 2010 and with its annual (government) funding of Rp 4 to 5 trillion it has not been able to address the housing supply for low-income people. If we don't have a breakthrough or revolutionary solution, this problem will be a ticking-time bomb for Indonesia. With the state budget being more limited every year, mandatory contribution is needed as another source of funding.
The Tapera law becomes the legal basis for the government to impose the contribution to a custodian bank managed by a Tapera fund management body (BP Tapera) for any Indonesian national or foreign worker in Indonesia.
After the passing of the Tapera law, the government will have to prepare the legislation into a more technical ruling, be it in the form of a government regulation (PP), presidential regulation, or a regulation on the Tapera fund management body.
If workers in formal and non-formal sectors with income more than the minimum wage participate in the mandatory savings, the funds collected will be very significant.
The fund will be used to subsidize the low income and it will be dedicated only to buying, building or renovating a participant's first house and will then be returned when they reach 58 years of age or have retired from work. Another benefit is that for those who already own a house, they could also get financing from Tapera.
However, the law has also drawn much opposition especially from businesspeople. Their view is that the mandatory savings, though not yet decided in the new law, will put additional labor cost onto companies. Investors will also take into account the mandatory savings as an additional cost before they decide to start business in Indonesia.
Meanwhile, developers think the implementation of this rule will drive the demand for housing, especially within the middle and lower classes. Furthermore, the increased demand for houses will create a multiplier effect because housing developments will create economic activity in connected industries.
We view that the Tapera law's potential impact will not be materialize in the coming period. We predict the new rule will take effect at least in another five years because the implementation of Tapera will have to wait for other regulations in the form of government regulation or even a ministerial decrees and is conditionally upon other (related) regulations that will hopefully run smoothly in order for Tapera to have a material impact.
Hopefully, a set of laws in the field of housing for low-income people, including Tapera will be able to overcome the fundamental problems regarding housing especially from the funding side.
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The writer is an industry analyst at PT Bank Mandiri.
