JAKARTA: The government has approved a plan to extend the repayment period for subsidised mortgages from 30 to 40 years, in a move aimed at expanding access to home ownership for low-income families.
The decision was made during a meeting last Wednesday held by the Public Housing Savings Management Board (BP Tapera), specifically the Tapera Committee.
The committee is led by Public Housing and Settlements Minister Maruarar Sirait and its members include Finance Minister Purbaya Yudhi Sadewa, Manpower Minister Yassierli and Financial Services Authority (OJK) head Friderica Widyasari Dewi.
“We are consistent, as directed by President Prabowo Subianto, in maintaining the interest rate for landed subsidised housing at 5%, Rusun (low-cost apartments) at 6% with a tenor of up to 40 years,” Maruarar said in a statement.
The meeting also discussed several aspects of implementation, including down payments, monthly repayments and affordability.
For landed housing, the government is exploring a financing scheme under a tiered interest rate system offering estimated monthly installments of 500,000 rupiah.
Under the same mechanism, the monthly installment for subsidised apartments would be around 700,000 rupiah.
Maruarar said last month that extending the loan repayment period could help ease the financial burden for homebuyers.
“Currently for subsidised landed houses, the monthly installment is around 1.7 million rupiah for a tenor of 10 years and 1.4 million rupiah for 15 years.
“With a 20-year tenor, this can drop to around 1.1 million rupiah, while a 40-year tenor can lower installments further to around 800,000 rupiah to 900,000 rupiah,” the housing minister said.
The government expressed optimism that, by maintaining interest rates for subsidised homes and extending loan tenors, it could meet this year’s target of disbursing 350,000 units under the housing finance liquidity facility (FLPP) and thus help accelerate the implementation of President Prabowo’s flagship “three million homes” programme.
Speaking at the same meeting, BP Tapera commissioner Heru Pudyo Nugroho said in addition to implementing the extended mortgage tenor of 40 years, the housing board seeks to achieve this year’s FLPP disbursement target through strategies such as strengthening market segmentation, promotion, synergy and collaboration, as well as digital marketing.
As of June 23, as many as 81,268 units, or 23.2% of the full-year target, had been distributed for total FLPP funding of 10.1 trillion rupiah.
The move to extend the mortgage tenor has drawn a mixed reaction, with industry groups and analysts praising it while raising caution to default risks, as many low-income households worked in the informal sector with unstable incomes and job insecurity.
Industry players suggested that the government strengthen the Tapera programme by providing credit guarantees for borrowers deemed non-bankable by lenders.
Analysts meanwhile pointed out that longer loan tenors could expose both borrowers and lenders to progressively heightened sensitivity to interest rates and inflation.
Though extending mortgage tenors could reduce monthly payments, borrowers might end up paying more interest over the lifespan of a loan, they said. — The Jakarta Post/ANN
