Key Takeaways
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JAKARTA, Investortrust.id — Indonesia is launching an unprecedented offensive to solve its housing crisis, as President Prabowo Subianto introduces a 40-year mortgage tenor as part of his ambitionto build 3 million homes every year.
In a move that fundamentally redefines Indonesian real estate finance, President Prabowo announced a tiered financing scheme during his May Day 2026 address. The plan allows workers to stretch home payments over four decades, drastically lowering monthly costs for low-income earners.
“Installments can be 20 years. If that’s not possible, 25 years. If it’s still not paid off, 30 years. If 35 years won’t work, then 40 years,” Prabowo stated at the National Monument (Monas) on Friday, May 1, 2026.
To ensure the math works for the masses, the President has ordered state-owned banks to cap interest rates for the people at a maximum of 5% per annum. This aggressive intervention aims to bridge the massive housing backlog while insulating workers from market volatility.
This policy shift is a massive catalyst for Indonesia’s property and construction sectors. By extending tenors to 40 years—double the current standard—the government is artificially boosting demand among the “unbankable” population. For investors, this signals a state-backed expansion of the mortgage books at major lenders like Bank Tabungan Negara (BTN), while simultaneously de-risking the sector through lower monthly debt-service ratios.
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A New Urban Blueprint
Prabowo’s ambition extends beyond financing to massive physical development. The President aims to build 1 million apartments annually within “New Cities” and industrial clusters to reduce commuting times for workers.
These 10 new urban centers will not just be residential blocks; they are designed as integrated ecosystems. Prabowo has mandated that every cluster must include schools, hospitals, daycare centers, sports facilities, and high-capacity public transport like Light Rail Transit (LRT) or dedicated bus lines.
“I have already planned for us to create new cities. These houses will be built in clusters near industrial areas, close to where the workers are,” the President explained, noting that the construction of 1 million units could generate employment for up to 5 million people.
OJK Clears the Path
To facilitate this credit surge, the Financial Services Authority (OJK) has executed a major policy pivot. Starting June 2026, the OJK will stop displaying credit defaults under Rp 1 million ($63) in its Financial Information Service System (SLIK), effectively granting a “financial pardon” to millions of potential homebuyers.
Previously, minor debts—sometimes as low as $3 for mobile phone bills—blocked citizens from qualifying for subsidized mortgages (KPR FLPP). “This has been the problem for a long time. If 20 people booked with us, only three could be processed because the other 17 were flagged by SLIK,” said Ari Tri Priyono, Chairman of the Himperra developer association.
Friderica Widyasari Dewi, OJK Commissioner, confirmed the shift, stating that reports will now only display debts above the $63 threshold. Additionally, banks must now update debt clearance status within three days (H+3), ensuring that citizens who pay off their debts aren’t trapped in bureaucratic limbo when applying for a home.
Market Response
The Real Estate Indonesia (REI) association had previously lauded the Finance Ministry’s proposal to extend subsidized mortgage tenors to 30 years, viewing it as a vital tool to expand access for first-time buyers. REI Chairman Joko Suranto noted that longer tenors provide an essential entry point for citizens who currently face income gaps.
“The length of a 30-year credit gives an opportunity to those whose current income is not yet sufficient to become sufficient,” Suranto stated. He emphasized that as a borrower’s career progresses, they should use income growth to accelerate principal payments rather than increasing consumption. “When income rises, it shouldn’t just be a supplement for consumptive behavior; it must be used to reduce the installments,” he advised.
While the industry previously rallied behind the 30-year target to help achieve the government’s goal of 350,000 subsidized units by December 2026, President Prabowo’s new 40-year ultimatum pushes the envelope even further. Finance Minister Purbaya Yudhi Sadewa reaffirmed that the Treasury fully backs these aggressive financing maneuvers through BP Tapera to ensure that the direct benefits of the energy and housing transition reach the grassroots level.