IDHF
IDHF and Housing
Finance in Indonesia
In industrialized countries, the ability to borrow funds to finance housing investment is generally a key determinant of whether a family can afford to become a home owner. Formal housing finance, i.e., mortgage loans provided by regulated institutions, plays an extremely important role in actualizing potential housing demand. Competition among lenders is keen to offer loan products that meet client preferences.
On the other hand, in developing nations, while formal finance sometimes plays a significant role, it is often not the primary means of realizing adequate housing. Rather, incremental unit construction financed through savings or short-term borrowing is typically the dominant path to eventually obtaining a unit of minimum acceptable quality.
Without access to formal finance, households who wish to purchase a completed good quality home with a clear land title must wait until they have amassed sufficient savings by themselves or obtained a loan from members of their extended family, friends, or a developer (installment sales involving a large down payment during the construction period and installments beginning during this period and continuing for several years after completion with the owner holding the title until all payments are made).
The problems with non mortgage finance are that not everyone has access (e.g., a family member who has the capital to make the loan or an employer who will do so), the cost of funds is often high, and in the case of installment sales from developers, there is uncertainty about receiving a unit after large deposits have been made. Hence, a prominent policy goal is to expand access to mortgage finance, and thus accelerate the rate of housing improvement.
In industrialized countries, the ability to borrow funds to finance housing investment is generally a key determinant of whether a family can afford to become a home owner. Formal housing finance, i.e., mortgage loans provided by regulated institutions, plays an extremely important role in actualizing potential housing demand. Competition among lenders is keen to offer loan products that meet client preferences.
On the other hand, in developing nations, while formal finance sometimes plays a significant role, it is often not the primary means of realizing adequate housing. Rather, incremental unit construction financed through savings or short-term borrowing is typically the dominant path to eventually obtaining a unit of minimum acceptable quality.
Without access to formal finance, households who wish to purchase a completed good quality home with a clear land title must wait until they have amassed sufficient savings by themselves or obtained a loan from members of their extended family, friends, or a developer (installment sales involving a large down payment during the construction period and installments beginning during this period and continuing for several years after completion with the owner holding the title until all payments are made).
The problems with non mortgage finance are that not everyone has access (e.g., a family member who has the capital to make the loan or an employer who will do so), the cost of funds is often high, and in the case of installment sales from developers, there is uncertainty about receiving a unit after large deposits have been made. Hence, a prominent policy goal is to expand access to mortgage finance, and thus accelerate the rate of housing improvement.
IDHF as digital information & knowledge center of Indonesia housing finance industry
IDHF intends to consolidate Indonesian housing finance information and knowledge jointly with its international partners, and to make it widely accessible.
- A standardized set of initial housing market, housing finance and policy measures that is tested country-wide and can be expanded and adjusted over time.
- Housing finance laws and regulations for each country and pertinent research and consulting reports provided copyright laws allow posting.
- Indonesia country assessments that focus on the unique features of Indonesia country’s housing finance system.
- A data download and analysis capability to facilitate research.
- An ongoing forum for discussion with international experts.
email: info@idhf.org