Indonesia’s bold plan to build three million homes a year to bridge the housing gap is garnering support not just from its central bank but also from countries looking to invest in the nation’s real estate. However, financial roadblocks are just one of many challenges standing between vision and execution.
Indonesia is embarking on an ambitious housing drive under President Prabowo Subianto, aiming to tackle the country’s chronic housing crisis.
According to a Housing Task Force Member, President Prabowo has set a major goal to combat poverty, with one of the key strategies being a housing program. “The President’s desire is to meet the housing needs of the poor, namely decent and habitable homes. If they have a house, they will no longer be poor because they already have an asset,” said Boni Minnang in last October.
According to the 2023 National Socio-Economic Survey (Susenas) by the Central Statistics Agency (BPS), Indonesia faces a housing backlog of 9.9 million households, highlighting a significant gap in home ownership.
This housing project, a cornerstone of Prabowo’s campaign promises, seeks to not only address the housing shortfall but also boost his political credibility. His government has set a bold target to build three million affordable homes annually.
However, turning this vision into reality presents a complex challenge. Building rapidly on such a massive scale raises concerns about construction quality.
Critics worry that the rush to meet housing targets may compromise quality, leading to unsafe or substandard structures. As a vast archipelago nation, Indonesia is particularly vulnerable to climate change impacts.
Indonesia’s vulnerability to floods, earthquakes, and other hazards means that new housing projects must prioritize resilience and sustainability.
With the fishery sector being a major economic contributor, a large portion of the population naturally resides along the coastline. This makes it crucial to build high-quality, climate-resilient housing that can withstand extreme weather events while supporting climate neutral developments.
Therefore, building carbon-neutral infrastructure is essential to realising Indonesia’s housing ambitions while safeguarding its future.
Adding to the complexity is the issue of infrastructure. Constructing homes in rural and remote areas without adequate transportation, water supply, and electricity could leave these new communities isolated.
Developing robust infrastructure is essential to make these housing projects genuinely viable. This requires meticulous planning and coordination, ensuring that homes are not just built but are well-connected and equipped with basic amenities.
One of the most daunting obstacles for the government is land acquisition. Finding suitable land while navigating ownership disputes and ensuring fair compensation for affected communities requires careful handling. The government’s directive to utilize state-owned land is a strategic move, but implementing it without causing social and environmental disruptions will be a daunting task.
Financially, the program’s estimated cost of $2.9 billion covers only construction, not the supporting infrastructure. International investments are crucial to filling this gap. Notably, Qatar and the UAE have pledged significant contributions, with Qatar promising to build six million homes. Additionally, potential partnerships with Chinese contractors are on the table. However, aligning these investments with Indonesia’s sustainability goals remains a priority.
To address funding challenges, Bank Indonesia (BI) has committed to purchasing bonds on the secondary market, signalling governmental support. Yet, details on how this will translate into long-term financing remain unclear.
Additionally, the Public Housing Savings Program (Tapera), introduced by former President Joko Widodo, mandates contributions from workers and employers to support affordable housing project. While scheduled to be implemented in 2027, the scheme continues to face criticism and resentment for potentially straining workers’ incomes.
Building sustainable communities, rather than just housing units, requires more than political will and financial backing. Prabowo’s administration must balance rapid construction with quality assurance, environmental sustainability, and social integration. Success will depend on how well the government can integrate resilient infrastructure, maintain quality standards, and manage community expectations.
