Homeownership in Indonesia
House ownership dominates Indonesia’s housing landscape, with only around five percent of Indonesian households living in rental properties. Despite this, the country is still grappling with a housing backlog of nearly 13 million units in 2023, predominantly affecting low-income households. Unequal development across the archipelago has led to higher proportions of slums in certain provinces. Furthermore, securing bank loans poses challenges for citizens who long to own a house, particularly given the prevalence of informal employment among most Indonesians. On the other hand, reliance on internal funds by most property developers to finance their projects, coupled with soaring land prices, can disadvantage smaller developers and limit the housing supply in the country.Housing programs and regulations
The Indonesian government has implemented various measures to address the housing backlog and increasing property demand. These include reducing key interest rates, introducing the housing financing liquidity initiative (Fasilitas Likuiditas Pembiayaan Perumahan/FLPP), and launching the One Million Houses program (Program Sejuta Rumah) that targets the construction of a million houses annually. The implementation of housing financing liquidity between 2022 and 2023 has facilitated funding of over 455 thousand housing units, equivalent to 51 trillion Indonesian rupiah. Furthermore, in 2023, an official regulation was launched to offer VAT discounts for purchasing new residential units, impacting the primary housing market in Indonesia.With the increasing foreign direct investment in recent years, the government has also recently introduced a regulation to further attract foreign investment through the Golden Visa, which offers residency through investment. While foreigners cannot fully own a property in Indonesia, they can acquire the Right to Lease (Hak Sewa), Right to Build (Hak Guna Bangunan/HGB), and Right to Use (Hak Pakai/HP) certificates that will allow them to stay on the property for more than 30 years. This initiative is particularly influential in metropolitan and tourist areas like Jakarta and Bali, making it easier for foreign nationals to settle. This policy is expected to bring a positive impact on property investment and demand across the country.
