The middle class, who spend US$2 a day according to the World Bank, and are primarily millenials, earn higher incomes than their lower class peers. However, their savings are insufficient to catch up to soaring down-payments caused by upward residential prices and high interest rates, even for a small house close to their workplaces.

The situation rings true for Arianti, a private employee in Bandung, West Java. The 34-year-old female currently rents a room near her office and dreams of owning a 36 square meter house in the city someday.

Compared to Jakarta, Arianti’s Bandung dream house is more affordable at between Rp 450 million (US$33,811) and Rp 500 million.

To meet her goal, she is setting aside Rp 4 million to Rp 5 million for 12 months for a down payment worth Rp 40 million to Rp 50 million.

Arianti believes with her current salary, she could buy a house, but criticizes the absence of breakthroughs to help the middle class demand for housing, such as subsidies in interest rates, which could ease installments.

“Instead of solely focusing on people with low incomes, the government must also assist those with middle class incomes, who are not eligible for subsidized mortgage programs, but face high interest rates [under non-subsidized schemes],” she said.

Under a government-backed mortgage program for low-income people, dubbed FLPP, only those with monthly salaries under Rp 4 million and Rp 7 million are eligible to apply for credit for landed houses and apartments respectively.

Millenials, however, earn Rp 6.07 million a month on average, lower than the average Rp 7.5 million that allows them to buy the cheapest houses in Jakarta of Rp 300 million, according to a joint study by property
website Rumah123.com and job search engine karir.com last December.

The government is addressing this issue by preparing to merge the FLPP funds with the public housing savings (Tapera) program, a controversial mandatory saving scheme for formal and independent workers required under a law passed last February.

Tapera, however, is intended for people with low incomes with a monthly salary under Rp 4 million.

Those with monthly salaries above Rp 4 million can enjoy the scheme as a retirement fund that can only be withdrawn at the age of 58, similar to retirement investment saving run by the Workers Social Security Agency (BPJS Ketenagakerjaan).

Under its “1 million houses” program, the government aims to provide housing for people with low incomes, while also tacking the domestic housing backlog that stood at 11.7 million houses in 2015.

State-owned secondary mortgage company Sarana Multigriya Finansial (SMF) is trying to tap the millenials’ demand by starting a pilot project in which it channels its funds through multifinancing companies.

“We are trying to explore the demand from millenials, particularly creative industry workers. They are able to take mortgages, but often don’t have fixed incomes,” said SMF president director Ananta Wiyogo.

As one of the state-owned firms under the Finance Ministry’s supervision, SMF was expected to boost its leverage following state capital injection (PMN) worth Rp 1 trillion last year, bringing its total capital to Rp 6 trillion this year, Finance Minister Sri Mulyani has asserted.

Sri Mulyani said that one of SMF’s products, namely asset securitization through the form of participation certificates (EBA-SP), could help reduce mismatch of maturity in banks.

“People save their money in the short term, while mortgages need a longer time period. So, the EBA-SP plays an important role in bridging that,” she said.

SMF plans to increase its EBA-SP to Rp 2 trillion this year, up from Rp 1.5 trillion last year.

Popular

Volcano erupts in North Sulawesi, hundreds evacuated

Dubai roads, airport reel from floods after record rains

Ramadan boosts consumer confidence, retail sales