To make house more affordable for low income people
Posted on May 12, 2008
Filed Under Column
The Ministry of Housing just raises the price of subsidized low cost housing from a maximum of IDR49 million to IDR55 million for target group I, from a maximum IDR37 million to IDR41.5 million for target group II, and from a maximum of IDR25 million to IDR28 million for target group III. The reason behind this price hike is more or less due to the recently increase of building materials. With the price hike, the developers will expectedly be encouraged to build as many as possible low cost houses, and therefore the supply will also increase. The question is can we expect that with the price increase, the demand of subsidized low cost house will also increase?
In the past three years, the development of subsidized low cost house or known as healthy simple house (“RSH”) was always behind the target set by the Ministry of Housing. In 2005, from the target of 114,000 units, the units delivered were only 79,899 or about 69.6 percent. From 2006’s target of 140,548 units and 2007’s target of 136,300 units, the units delivered were only 85,661 and 107,816 or about 60,9 percent and 79,1 percent respectively. Those who involved in the industry know precisely what has been happening.
The demand of low cost housing in Indonesia has been weaken since 1997’s Asian economic crisis and the world crude oil price hike in 2005. The collapse of Indonesia economy along with several other Asian countries in 1997 and the increase of domestic gasoline price due to world oil price hike in 2005 has deteriorate the purchasing power of low income people. This, in return has made difficult for those low income people to purchase a house even with the subsidy from government.
With this regard, the decision to increase of maximum subsidized low cost house price by the Minstry of Housing will make even more uneasy for low income people to purchase a house. So it is almost impossible for government to achieve its upcoming years subsidized low cost housing targets, if the price of house still continue to go higher and the purchasing power of low income people has not been improved yet. So, the problem is not on the supply side but the demand side.
If that is a fact, the improvement of demand for low cost housing is very crucial. It means that the government needs to bring the low cost housing price down not the other way around to bring the price up. By bringing the price of low cost housing down, the demand of housing can be improved.
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