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or minimum wage earners like Sundari, 45, the decision to spend a quarter of her income, or Rp 700,000 (US$52.5) per month, to pay for a house requires some consideration.

“I would have to think about it. I want to fund my children’s education first,” said the Jakarta-based food seller in response to the government’s plan to require informal sector workers to save around
Rp 700,000 monthly for a year to participate in its sponsored mortgage scheme.

Sundari, who earns Rp 3 million each month, admitted that the amount of saving required was “reasonable” and that she would think about it if she could build a house in her hometown in Brebes, Central Java. At the moment she lives with her family in a rented house.

The government has recently floated the idea of boosting home ownership among people in the informal sector, who are estimated to account for more than half of the workforce in Indonesia, through a special loan scheme.

Those in the informal sector have previously struggled to get access to housing loans as, lacking proof of earnings, banks are reluctant to extend credit.

The government is slated to cover 25 percent of the housing cost in the early months of the loan with the borrowers paying the rest through a mortgage with a commercial rate of around 12 percent.

The Public Works and Public Housing Ministry Director General of Home Financing, Maurin Sitorus, said that the requirement to save a particular amount of money for a year was in order to help banks measure the average earning and capability of payment of the participants.

The minimum saving requirement might be around Rp 700,000 per month.“In the end the banks will be the ones to examine and decide the feasibility of granting the people mortgages,” he said on Thursday.

So far, the banks that are ready to join the scheme include state lenders Bank Rakyat Indonesia (BRI) and Bank Tabungan Negara (BTN).

“They also have to join a sort of organization or cooperative, for [loan] risk mitigation,” he added. The organization or cooperative is expected to pay the monthly mortgage if borrowers default on payments, so the banks’ non-performing loan (NPL) ratio will be unaffected.

Maurin also said the government would disburse up to Rp 3 trillion from the state budget over the next three years for the program.

The pilot project for the scheme is expected to start next year, targeting 5,000 people in the informal sector, climbing to 35,000 people in the next year.

The government will also work with regional governments in the scheme, although Maurin stated that the location of the houses would be up to housing developers.

President Joko “Jokowi” Widodo has vowed to give housing projects priority during his term, as the country had a housing backlog amounting to 13.5 million homes in 2010.

The government also launched its flagship 1 million houses program in April last year to reduce the housing backlog to 6.8 million homes in 2019.

Meanwhile, the head of BTN’s subsidized mortgage division, Hirwandi Gafar, said it had already channeled mortgages to the informal sector through the government-sponsored housing loan liquidity (FLPP) facility. It also ran a similar scheme back in 2005 with an angkot (public minibus) driver cooperative. “Basically we can fund the informal sector, but we are selective,” he said.

Hirwandi added that the Rp 700,000 monthly payments the bank required would also be used for a down payment and the amount would reduce as the loan was paid off.

He cited recent government economic policy packages that have cut down permits for low-income housing construction to 11 from the previous 33 as a means of reducing house prices.