T

he government has rolled out new housing loan subsidies and opened the door to more citizens to access the facility amid the COVID-19 pandemic, which is expected to disrupt businesses and hit consumer purchasing power.

It launched Rp 1.5 trillion (US$89.7 million) in mortgage subsidies for 175,000 low-income families nationwide and increased the salary cap for eligible recipients to Rp 8 million for all types of housing, from Rp 4 million for landed houses and Rp 7 million for low-cost apartments previously. The new provision took effect on April 1.

The minimum wage varies across the country from Rp 1.7 million to Rp 4.3 million per month.

“We hope that the housing subsidies will help low-income households to acquire decent and affordable housing, especially in these difficult times of the COVID-19 pandemic,” the Public Works and Housing Ministry’s infrastructure financing director general, Eko “Heri” Djoeli Heripoerwanto, said in a press statement on March 31.

Heri explained that the stimulus would be in the form of loan interest rate subsidies (SSB) and down payment subsidies (SBUM). Out of the Rp 1.5 trillion, Rp 800 billion will be used for SSB and Rp 700 billion for SBUM.

The housing subsidies are part of a Rp 10.3 trillion stimulus package announced by the government in February to cushion the impacts of COVID-19 on household spending. The pneumonia-like disease has infected more than 2,200 people in the country with 198 deaths and disrupted business activities as citizens stay at home to limit the virus’s spread.

The new mortgage subsidies allow low-income households to pay a mortgage interest rate of just 5 percent per year, much lower than the current 9 to 10 percent, with a tenor of up to 10 years. People living in Papua and West Papua provinces will pay 4 percent in interest per annum for a loan tenor of up to 20 years.

The government will then pay any differences in the interest rate. For low-income people who buy a landed house, the government will provide Rp 4 million in mortgage down payment assistance with Rp 10 million for people in Papua and West Papua provinces, Heri said.

Three state-owned banks, namely Bank Negara Indonesia (BNI), Bank Rakyat Indonesia (BRI) and Bank Tabungan Negara (BTN), will disburse the subsidies.

“The Public Works and Housing Ministry is still keeping the opportunity open for other banks that want to take part in the program so that low-income families will get as easy access as possible to the facility through the banks’ networks,” Heri said.

He expressed hope that the latest stimulus would enable the government to achieve its target to provide mortgage subsidies to 330,000 low-income households this year.

In addition to the 175,000 families targeted by in the new subsidies, the government will also support 88,000 poor families but a house through the Housing Financing Liquidity Facility (FLPP) and 67,000 households through its new savings-based housing assistance.

“The government is making every possible effort to help low-income citizens to fulfill one of life’s basic needs, which is to have a home,” Heri added.

The government has been struggling to reduce the country’s housing backlog, which stood at 7.6 million in 2015. President Joko “Jokowi” Widodo’s administration aims to build 1.25 million houses this year to meet its commitment to build 1 million houses per year.

Since 2015, around 4.8 million houses have been constructed: 699,770 in 2015, 805,169 in 2016, 904,758 in 2017, 1.13 million in 2018 and more than 1.25 million in 2019.

Property developers expressed their appreciation for the government’s new subsidies. Indonesian Settlement and Housing Developers Association (Apersi) chairman Junaidi Abdilah said in a statement that the association would adjust its potential buyers target accordingly through the subsidized housing loan mobile application Sikasep.

Developers Indonesia (PI) chairman Barkah Hidayat and National Housing Development Alliance (Apernas) Jaya secretary-general Risma Gandhi also urged banks to optimize their mortgage loan disbursements for the program.

“Problems over spreading awareness about the regulation usually happen between banks and their regional branches, delaying the process for regional developers,” Risma said.

Paulus Totok Lusida of Real Estate Indonesia (REI) told The Jakarta Post on Wednesday that the stimulus could prop up the property sector, which saw annual growth of only 3.5 percent in the past few years.

The sector relies heavily on subsidized housing programs, which account for half of the industry’s revenue, according to REI data.

“At least the subsidies can maintain the sector’s existence, because if it drops, it won’t be easy to pull it back up again,” Paulus said.