Government to assist budget-housing sector  


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December 15, 2006

Andi Haswidi, The Jakarta Post, Jakarta

Vice President Jusuf Kalla says the state will subsidize interest payments on loans taken out by developers for the construction of low-cost housing to the tune of about Rp 15 trillion (about US$16.4 billion) over five years.

"The government will provide interest-payment subsidies to developers, and work hand-in-hand with local administrations to simplify permits and eliminate various types of unnecessary local taxes," the Vice President told reporters Thursday in Jakarta as quoted by Bloomberg.

Kalla said the President had signed a decree to accelerate the construction of such homes.

"There's too big a gap in our cities between the rich, with their big houses, and the poor who cannot afford to buy homes," he said.

The government plans to build 1,000 low-cost apartment buildings in 10 cities over the next five years, with each building expected to consist of 100 apartments.

"Each apartment will cost Rp 150 million," Indonesian Real Estate Developers Association (REI) chairman Lukman Purnomosidi said.

Speaking separately, Indonesian Chamber of Commerce chairman Mohamad S Hidayat, who also owns a real-estate business and once served as REI chairman, said that Kalla had given REI a mandate to put the low-cost housing program into effect.

"It just so happens that the Vice President has a background in business. You get the chance to talk and make suggestions to him. He is very eager to see this housing program being realized," Hidayat told the REI's annual conference Thursday at the Sultan Hotel, Jakarta.

Hidayat said that providing housing for low-income groups had been one of the REI's priorities for decades.

"I remember when only Bank Tabungan Negara was interested in providing loans for low-cost housing developments. But now, more and more state and private banks are participating, offering various credit schemes for low-income groups," he said.

"I hope that this program will be supported by the banking sector through lower lending rates," he said, while at the same time criticizing the tardiness of the banking sector in reducing lending rates in line with the reduction in the central bank rate to 9.75 percent.

Currently, the country's state and private banks are offering loans at rates ranging between 13.5 and 17 percent.

According to Bank Indonesia figures, loans have contributed to 33.6 percent of total investment by the property business this year, with this contribution expected to grow to 36.5 percent in 2007.

Also speaking at the meeting, the consumer-affairs director of state-owned Bank Rakyat Indonesia (BRI), Toni Soetirto, said that BRI would provide subsidized budget housing loans for those with incomes of less than Rp 2 million per month. The loans would be available from 486 BRI branches around the country.

Aware of the complex paperwork required for securing a loan, Toni said that BRI would introduce a centralized approval process to speed up the process.

"The growth in budget housing loans has been low in Indonesia. The ratio is only 1.4 percent to GDP, while in Thailand the equivalent ratio stands at 4.4 percent, and in Malaysia at 27.7 percent," he said.