Low-cost housing development to increase up to 30 percent

The Jakarta Post, Jakarta

A real estate association said Monday it would aim for a 25 to 30 percent increase in the development of houses for low-income people throughout the country in 2008.

"We will continue to develop more subsidized houses for low-income people, particularly in Greater Jakarta, Bandung (West Java), Sidoarjo (East Java) and in some other areas," the chairman of Real Estate Indonesia (REI), F. Teguh Satria, said.

"Demand for low-cost houses has increased, especially in Batam in the Riau islands, Pekan Baru, Semarang and Makassar."

Teguh said the association aimed to build around 130,000 low-cost houses throughout the country this year.

The target for last year was 100,000, but developers only managed to build some 78,000 units.

Both figures were below the target set by the government, which wanted at least 1.35 million low-cost houses built during the 2004-2009 period, or around 280,000 units per year.

Teguh said developers were not able to meet the government's target because they faced various obstacles including a limited availability of land, high taxes and short supplies of water and electricity.

To support the low-income group, the government increased the subsidy on low-cost houses by Rp 300 billion last year to Rp 800 billion in 2008.

The subsidy is taken from the state budget and is to cover interest rates charged by banks to low-cost households.

"The government's subsidy on housing will be given to the buyers, not the developers," Teguh said.

"That way, low-income people can afford to buy houses."

The association defines a low-cost home as one priced below Rp 60 million.

"However, we differentiate the prices for houses in Papua and Bali, where construction materials and land in those two areas are more expensive than in Java," he said.

The association defines low-cost homes in Papua and Bali as those priced below Rp 75 million.

Lawmaker Abdullah Azwar Anas said the central bank should push big banks to allocate higher portions of their loans for the development of low-cost houses in order to speed up the pro-poor housing program.

"Most banks are reluctant to finance the development of low-cost houses because it offers a low profit margin," Teguh said.

State lender Bank Tabungan Negara (BTN) has been the most supportive so far, he said. (rff)