An aerial view shows a subsidised housing complex on Aug 1, 2024, in Puuwatu district in Kendari, Southeast Sulawesi. - Antara
JAKARTA: A top advisor to president-elect Prabowo Subianto has said that the incoming administration plans to build three million housing units per year and that smaller businesses rather than big construction conglomerates are to get the largest part of the pie.
Speaking at an event organised by the Indonesian Chamber of Commerce and Industry (Kadin) on Monday (Oct 7), Hashim Djojohadikusumo said Prabowo wanted to make the housing sector “massive”, given its multiplier effect on overall economic activity.
“Big contractors, go ahead. Everybody has a stake in the pie. The pie is very big,” said Hashim, after explaining that the government would only allow the property groups to get involved in the development of 1 million apartments per year in urban areas.
He suggested that the development would involve foreign financing and advice: “I have met with the leadership of HDB (Housing and Development Board) in Singapore; HDB will help us as an advisor and consultant, the name [of the company through which this would happen] is Surbana Jurong. They’re willing to help us.”
The other 2 million units, meanwhile, are planned for rural areas and to be handled by medium, small and micro enterprises (MSMEs), cooperatives and village-owned businesses (BUMDes).
In addition to newly constructed houses, this also includes renovated properties. Hashim, who is also Prabowo’s brother, argued that the housing development plan might bump up the archipelago’s economic growth by “about 1 per cent” and that “the money will circulate within the villages” instead of “flowing abroad”.
The rough picture comprises building or renovating 20 to 30 houses in rural areas every year for Indonesia’s 75,000 villages, which brings the total to 1.5 million to 2.25 million annually. He went on to say that there was a backlog of 10.7 million housing units in the country, on top of 27 million households living in residences categorised as uninhabitable.
The plan is to provide housing or renovating credit to “farmers and fishermen” who generally already own a plot of land, “which means land procurement or acquisition will not be a problem”, Hashim claimed.
“And, of course, it’s impossible to tackle [the plan full scale] in the first year [of Prabowo’s government], but at a steady state, it may [come into full effect] in the third year,” Hashim said.
He confirmed earlier-announced plans that Prabowo would establish a dedicated ministry specifically for housing, which is currently handled as one of multiple responsibilities of the Public Works and Housing Ministry.
Hashim said that prioritising housing was one of President “Joko” Jokowi Widodo’s programmes that would be continued by the president-elect.
He noted that Jokowi targeted erecting 1 million houses every year but only managed to build 200,000 per annum.
He explained that the sector’s multiplier effect stemmed from the fact that building houses necessitated “supporting industries” like steel, cement and lumber, to name a few.
Paramadina University economist Wijayanto Samirin told The Jakarta Post on Monday that the housing sector was an “effective means” to create jobs and jack up economic growth, given its multiplier effect on 142 other sectors and subsectors.
“However, the target of building three million homes seems too aggressive, [...] which might bring about an oversupply that is dangerous for the property sector. It might crash,” Wijayanto hypothesised, before saying that it would be “very good” if Prabowo could attain just 1 million units a year.
To avoid the risk of a “property crisis”, Wijayanto said the right approach would be to create supply by simplifying licensing, establishing landbanks and ensuring credit access and fiscal incentives for property developers.
Simultaneously, the government must stimulate demand by easing regulations, providing subsidised mortgages and innovating on a banking regulation that makes informal sector workers eligible for subsidised mortgages, Wijayanto said.
Center of Economic and Law Studies (CELIOS) executive director Bhima Yudhistira Adhinegara told the Post on Monday that public housing was important, but the government would also have to ensure that the housing is habitable.
“Because, up until now, many subsidised houses are unused because of low building quality and inadequate supporting infrastructure,” Bhima said.
For fiscal firepower, Bhima said the incoming government would have to reallocate some funds for the housing program, which would require some trade-off with other infrastructure plans.
Real Estate Indonesia (REI) chairman Joko Suranto, who attended the Kadin event on Monday, said his organization “appreciates” the plan and has prepared a study on the “property impact on economic growth”. - The Jakarta Post/ANN
