JAKARTA: Building homes for low-income families is becoming financially untenable, developers have warned, explaining that profit margins have been eroded by surging construction costs and a weakening rupiah.
The Association of Housing and Settlement Developers (Himperra) has called for an urgent adjustment to the government’s benchmark selling price for subsidised housing, arguing that the current pricing formula “no longer reflects economic reality on the ground”.
Mohammad Aviv, who heads Himperra’s division of organisational affairs, leadership development and membership, stressed that operational overheads were escalating from year to year while selling prices remained capped.
“The selling price should ideally be adjusted annually, as material and labour costs rise every year.
“Come 2026, we are not just facing a simple price hike but a fundamental shift in the cost structure,” Aviv said on Tuesday, as Bisnis reported.
The government last revised the benchmark price in 2024.
Aviv added that the thinning margins were being compounded by a chain reaction set off by rising fuel prices.
The volatility and depreciation of the rupiah against the United States dollar had further inflated logistics expenses and the cost of imported raw materials.
This has left developers of subsidised landed housing with increasingly tight cash flows.
For many, accelerating the disbursement of financing has become the only way to stay afloat.
“Margins for subsidised housing are getting thinner.
“If the contract agreement isn’t signed quickly, the developer could go bankrupt,” Aviv warned, as quoted by Bisnis.
Beyond the financial strain, Himperra called out regulatory obstacles constricting supply, notably the land conversion moratorium.
Claiming that the policy was not synchronised among ministries, leading to project delays, Himperra urged the central government and regional administrations to harmonise these policies to improve the investment climate in the property sector.
Previously, Harry Endang Kawidjaja, an expert staff member at the Public Housing and Settlements Ministry, said the recent rupiah slide had triggered an average cost surge of 20%, specifically for building structures.
Natural materials saw the sharpest spike, surging by up to 50%. Harry attributed the steep increase to mining moratoriums enforced in several regions and the recent diesel fuel price hike.
The widening gap between production costs and selling prices is jeopardising government plans to make homeownership more affordable across the country and to massively increase housing stock in both urban and rural regions.
Details of President Prabowo Subianto’s three million homes programme remain vague, with questions raised over its implementation and its intended beneficiaries, yet the government has insisted that multiple investors are committed to participating in the initiative.
Under the flagship programme, the government aims to build one million homes in cities and two million in villages across the archipelago every year.
National housing task force head Hashim Djojohadikusumo said in January last year, shortly after the Prabowo administration came to power, that people would still need to pay instalments for housing provided under the programme.
In a parallel effort to ease the burden on low-income buyers, the government is also preparing a regulation to extend the repayment period for subsidised home mortgages to 40 years.
Public Housing and Settlements Minister Maruarar Sirait said coordination between the government and stakeholders was underway to implement the planned changes.
“We are formulating (the regulation) for 40-year mortgages.
“We need to engage with developers, consumers and the banking sector.
“The whole ecosystem must coordinate so that this can be implemented,” he said on May 7, as reported by news agency Antara. — The Jakarta Post/ANN
