Indonesia to Issue Housing Bonds for 3 Million Homes, Risks and BI’s Role Under Scrutiny
JAKARTA, investortrust.id - Indonesia’s government unveils a plan to issue state securities to finance 3 million homes for low-income families, sparking optimism for housing access and economic growth, while the central bank signals potential secondary market purchases to bolster liquidity—yet economists warn of default risks that could strain the national budget. This ambitious initiative tests the balance between innovation and fiscal prudence amid competing national priorities.
Finance Minister Sri Mulyani announced on Thursday, Feb. 20, 2025, that the issuance of Surat Berharga Negara (SBN), or government securities, dedicated to housing would channel funds to low-income communities.
“The funds raised are allocated to finance homes for those in need,” she said from her Jakarta office. The move aimed to enhance the Housing Financing Liquidity Facility (FLPP) without tapping the 2025 state budget (APBN), leveraging a Rp 80 trillion ($5.1 billion) credit facility through reduced Minimum Reserve Requirements (GWM). This involved collaboration with Bank Indonesia (BI), the Financial Services Authority (OJK), and Himbara Banks—a consortium of state-owned banks.
The announcement followed a joint press conference on Wednesday, Feb. 19, 2025, at the Ministry of Finance’s Djuanda I Building, where Sri Mulyani, Minister of Housing and Settlements Maruarar Sirait, Minister of State-Owned Enterprises Erick Thohir, and BI Governor Perry Warjiyo outlined the funding strategy.
Perry clarified that BI’s broader SBN purchases, including those for housing, would occur in the secondary market. “The funds can support housing, downstream processing, food security, and other priorities under the Asta Cita vision, beyond just debt switching for ex-Covid-19 maturities,” he said.
However, the mechanism awaited parliamentary approval, with Commission XI Chair Mokhamad Misbakhun scheduling discussions in the coming weeks. “Liquidity support from BI is critical to address the housing backlog,” Misbakhun noted.
Yet, the plan drew caution from economists. On Friday, Feb. 21, 2025, Wijayanto Samirin, an economist from Paramadina University and co-founder of the Paramadina Public Policy Institute, warned of potential pitfalls. “The risk of default is real, and if it occurs, the APBN will bear the burden,” he told investortrust.id.
He argued that the bonds’ success depended on homebuyers’ ability to repay mortgages, with weak repayment capacity threatening defaults.
Wijayanto also highlighted competing fiscal demands—such as the free nutritious meal program (MBG), contributions to BPI Danantara for infrastructure, food estate projects, and the new capital, Nusantara (IKN)—that could stretch resources thin.
“In its first year, the government must tread carefully. These plans will prove viable or falter by 2026, impacting credibility through 2029,” he said.
He further cautioned against aggressive cost-cutting, suggesting it could slow growth. “Forcing efficiency might hinder the economy, and gains from MBG or Danantara won’t offset massive reallocations,” Wijayanto explained.
The housing initiative, part of President Prabowo Subianto’s inclusive growth agenda, aimed to address a chronic housing shortage while testing market-driven financing. Analysts saw it as a litmus test for Jakarta’s ability to deliver on ambitious promises without destabilizing fiscal health, with parliamentary talks set to clarify its feasibility.
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Caption: Co-Founder and Advisor of Paramadina Public Policy Institute Wijayanto Samirin speaks during a virtual discussion on Saturday, May 18, 2024. Screenshot: Investortrust/Sarah Hutagaol