INDONESIA’S FUTURE DIRECTIONOF HOUSING POLICIES, PROGRAMS, AND

FINANCING

Ulaanbaatar, June 26-29, 2011

MINISTRY OF HOUSINGTHE REPUBLIC OF INDONESIA

Hetty Adriasih[hetty.adriasih@gmail.com]

Dr. Eko D. Heripoerwanto[herieko123@yahoo.com]

Workshop on Housing Finance

Outline

Law, Regulations and Housing Policy 2010-2014

1 Problems

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3

4

5

Roadmap Housing Development 2005-2025

Policy Direction

Strengthening the Primary Market

Institutionalizing Liquidity Facilities

6

7

Housing Programs 2010-2014

Problems

Lack of Housing SupplyLack of Housing Supply

Increasing Number of Substandard Housing Units

Increasing Number of Substandard Housing Units

Expanding Slum AreasExpanding Slum Areas

Backlog is expected to increase from 5.8 million units (2000) to 8 million by the end of 2010

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2

3

2009 :4,8 million houses in damaged condition with two of three basic structures (wall, floor and roof) in need of repair

2008 :13,8% households still live in dirt floor houses12,4 % live in non-permanent wall houses1,2 % lives in leaf roof houses

200721,1% of houses in Indonesia have no access to clean water8,54% have no electricity22,85% have no access to laterines

The expansion of slum areas reaches 1.37% per yearExpanded slum areas: 54.000 Ha (2004) 57.800 Ha (2009)

1

Only +20% of housing

stocks provided by market

Law, Regulations and Housing Policies 2010-2014

To increase the provision of decent and affordable housings for low income householdsTo increase the provision of decent and affordable housings for low income households

To increase the accessibility of low-income households to decent and affordable housingTo increase the accessibility of low-income households to decent and affordable housing

To improve the quality of human settlement areas through provision of infrastructure, basic facilities and adequate public utilities, integrated with housing development in order to create cities without slums

To improve the quality of human settlement areas through provision of infrastructure, basic facilities and adequate public utilities, integrated with housing development in order to create cities without slums

To strengthen the security of tenure through facilitating pre-land certification and post-land certification for low-income households, as well as standardizing building permit issuance

To strengthen the security of tenure through facilitating pre-land certification and post-land certification for low-income households, as well as standardizing building permit issuance

To promote the quality of planning and its implementation in housing and human settlements development

To promote the quality of planning and its implementation in housing and human settlements developmentTo promote primary housing markets and secondary mortgage finance supported by long-term sustainable financing sources through information dissemination and standardization of mortgages, as well as development of required regulatory support

To promote primary housing markets and secondary mortgage finance supported by long-term sustainable financing sources through information dissemination and standardization of mortgages, as well as development of required regulatory support

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2

3

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1. REPUBLIC OF INDONESIA’S BASIC CONSTITUTION 1945, Section 28 H, SubSection (1):

“Every people has the rights to have a wealthy life, home and healthy environment as well as the rights to obtain health care.”

2. LAW NUMBER 39 YEAR OF 1999 REGARDING HUMAN RIGHTS, Section 40:“Every people has the rights to have an adequate shelter and a proper life.”

3. LAW NUMBER 1 YEAR OF 2011 REGARDING HOUSING AND SETTLEMENTS AREA, Section 50:

“Every people has the rights to live in adequate house and proper life.”

2

1

Construction of 650 twin blocks rental apartment *)Construction of 650 twin blocks rental apartment *)

Construction of 685.000 subsidized housing unitsConstruction of 685.000 subsidized housing units

Facilitation of the construction of 180 apartment towers through private-sector participationFacilitation of the construction of 180 apartment towers through private-sector participationProvision of infrastructure, facility and utility fo real estate development, among others to support new city development (New Town Development)

Provision of infrastructure, facility and utility fo real estate development, among others to support new city development (New Town Development)Facilitation of new development/improvement of self-help housing quality and the provision of infastructure, facilities and utilities for self-help housing

Facilitation of new development/improvement of self-help housing quality and the provision of infastructure, facilities and utilities for self-help housing

Construction of special housing, including rehabilitation and post-disaster housing reconstructionConstruction of special housing, including rehabilitation and post-disaster housing reconstruction

Facilitation of land provisionFacilitation of land provision

Utilization and development of local resources, technology and research in housing and settlements areaUtilization and development of local resources, technology and research in housing and settlements area

*) Ministry of Housing (380 twin blocks ) and Ministry of Public Works (270 twin blocks)*) Ministry of Housing (380 twin blocks ) and Ministry of Public Works (270 twin blocks)

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To increase the provision of decent and affordable housing for low income householdsTo increase the provision of decent and affordable housing for low income households

Housing Programs 2010-2014

PRIMARY MARKETSECONDARY

MARKET

Human Settlement Equilibrium and Public

Service Obligation

Facility Liquidit

y

Local Governme

nt

Infrastructures, Facilities and Utilities Area:Water Supply System;Septic Tank Communal)Electricity System;Street Lightening

Loan/Grant

Distribution of Loan /

Distribution of Grant

Secondary

Mortgage

Market

Financing

Publishing

Managed by the Asset

Management Centre (under the

Local Governmen

t)

HUMAN SETTLEMENTS

DEVELOPMENT

ASSET BACKED SECURIT

IES

National Housing Saving

Underlying

Asset

Infrastructures,

Facilities and Utilities Area Development

Government Special Task to State Owned Corporation on Housing Development for Low Income People with Appropriate Specification and Price Based on Government Standard

To Strengthen Local

Government Capacity in

Housing and Settlement

Development through Land

Banking System

Construction Credit with Low Interest

Self-Help Mortgages and Micro Credit with

low interest

Landed Housing

DEVELOPERS

STATE/LOCAL OWNED

CORPORATION IN HOUSING AND DEVELOPMENT

Blended Financing

Urban-Rural, PSU

(Infrastructures, Facilities and

Utilities) Construction Material and Engineering Construction

BLU (Public Service Agency)Housing

Financing Centre

Infrastructures, Facilities and Utilities Area:Road;Drainage.Local Construction Material;•Local Architect;

ROADMAP HOUSING AND HUMAN SETTLEMENTS DEVELOPMENT 2005 - 2025

ROADMAP HOUSING AND HUMAN SETTLEMENTS DEVELOPMENT 2005 - 2025

Bank / Non BankExecutor

HOUSEHOLDS

Self-Help Housing Develop

ment

Self-Help Housing

POLICY DEVELOPM

ENT

Own Rent

Empowerment Community &Stimulant Support

•Dekon (Authority Delegation);•DAK Perkim (Special Allocation Fund for Housing and Settlement )

RESIDENTIAL

AREAS

Completed Units

A

A

SECONDARY

MORTGAGE

FINANCE

NATIONAL

PROGRAM ON COMMUNITY

BASED DEVELOPMENT

IN HOUSING AND HUMAN

SETTLEMENT S

Low Cost Aparment

s

4

GOI POLICIES DIRECTIONSIN HOUSING PROVISION FOR MIDDLE-LOW & LOW INCOME GROUPS

STRENGTHENING PRIMARY HOUSING MARKET IMPROVING MARKET EFFICIENCY (DEMAND & SUPPLY SIDE) PROVIDING FISCAL INCENTIVES AND DISINCENTIVES

FURTHER DEV. HOUSING FINANCE ASSISTANCE PROGRAMS EXPANDING HOUSING ASSISTANCE PROGRAM (HAP) PROVIDING FISCAL INCENTIVES IN RELATION WITH HAP

STRENGTHENING SECONDARY MORTGAGE FINANCE PROMOTING SUSTAINABLE PROVISION OF LONG TERM FUND FOR THE HOUSING SECTOR

INTEGRATING HOUSING FINANCE WITH CAPITAL MARKET

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PROVIDING AFFORDABLE MORTGAGE THROUGH LIQUIDITY FACILITY

SUBSIDIZED SCHEME LIQUIDITY FACILITY SCHEME

Subsidy Period Limited time [average 4 years] Over the period of mortgage life (tenure)

Interest Rate Subsidized interest rate in certain limited time period and after that continue with market interest rate

Fixed one digit interest rate over the period of mortgage life (tenure)

Monthly Payment (PMT)

Monthly payment over the subsidi period ≤ 1/3 monthly income, after that monthly payment tends tobe ≥ 1/3 monthly income depends on the prevailing market rate

Monthly payment over the life of mortgage loan ≤ 1/3 monthly income

Budget Budget appropriation from Central Gov’t for subsidy (spending and non-revolving)

Budget appropriation from Central Government for investment (financing andrevolving)

Allocated Gov’t Budget

Required continous appropriation After a certain period, appropriation is begin to reduce from time to time, until no appropriation is further needed when National Housing Saving scheme is fully institutionalized.

Source of Fund National budget National budget + other funding sources

Utilization Only for demand side (Subsidized mortgage) Both for demand and supply sides:- Demand side: Subsidized mortgage with one digit

fixed interest rate and tenure up to 15 years

- Supply side: Construction credit with affordable interest rate and tenure up to 24 months

STRENGTHENING THE PRIMARY MARKET6

Inte

rest

Rat

es

182 4 6 8 10 12 14 16 20Repayment Period (Years)

Monthly payments follows fluctuating market rates,

leading to unaffrodable PMT and mortgage deafault

MORTGAGE with Subsidized Scheme MORTGAGE with Liquidity Facility Scheme

2 4 6 8 10 12 14

Repayment Period (Years)

While market rate fluctuated,PMT is fixed dan affordable

resulting no affect to mortgage default

Increasing Subsidized Ratemake mortgage affordable only during subsidy period

Maintain Subsidized Rate in 1 digit make it

affordable and fixed PMT over the mortgage tenure

Inte

rest

Rat

es

INSTITUTIONALIZING LIQUIDITY FACILITY

THE IMPACTS OF LIQUIDITY FACILITY ON SUBSIDIZED MORTGAGE

GOVT’S BUDGET[FINANCING POST]

LONG-TERM FUND

GOVT’SSERVICE

UNIT (BLU)

IMPLEMENTING BANK

SUPPLY SIDE

CONSTRUCTIONCREDIT

SUPPLY SIDE

MORTGAGE

REPAYMENT

CONTRACTUAL SAVINGFOR HOUSING:-TAPERUM-PNS-TWP-TNI/POLRI-YKPP-SWASTA

PUBLIC FUND

REPAYMENT

INSTITUTIONALINVESTORS- JAMSOSTEK- PENSION FUND- INSURANCE

COMPANIES

REPAYMENT

7

NAD575

Sumut550

Sumbar950

Riau 200

Kepri1.400

Jambi200

Sumsel300

Bengkulu200

Lampung1.050

Banten700

DKI Jak100

Jabar2.125

Jateng2.875

DIY300

Jatim2.450

Bali150

NTB850

NTT2.950

Kalbar500

Kalteng100

Kalsel75

Kaltim0

Sulteng1.050

Sultra1.000

Gorontalo650

Sulut600

Sulsel1.300

Maluku450

Pabar400

Papua400

Babel200

Malut150

Sulbar200

DISTRIBUTION OF STIMULANT FOR SELF-SUPPORT HOUSING 2011

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Total: 25.000

T H A N K Y O U