Incentives Needed to Make Houses More Affordable

Kompas/Hendra A Setyawan

A handyman completes the construction of a house in a new housing complex built in the Parung Panjang area, Bogor, West Java, Tuesday (9/2/2021).

JAKARTA, KOMPAS — The high price of the houses built in Transit-Oriented Developments (TODs) make it difficult for millennial workers from the lower middle class to buy them. If the government is serious about providing them with affordable housing in TODs, there must be intervention, such as by providing incentives.

Eisha Maghfiruha of the Institute for Development of Economics and Finance (Indef) said in Jakarta on Friday that TOD housing benefited workers with high mobility, as living in TODs could significantly reduce public transportation costs or dependence on private vehicles.

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According to Eisha, no incentives, such as a subsidy, have been given so far to help workers purchase houses in TODs. The government has provided housing subsidies only for low-cost apartments. She said that incentives for TOD housing could be in the form of a value-added tax (VAT) exemption or a loan interest subsidy. "Essentially, the government can provide any kind of incentive so that TOD housing will be affordable for the lower middle class," she said.

No subsidies for purchasing houses in TODs have been given so far to middle-class workers.

Based on a 2019 study by the Asian Development Bank cited in the report “Transit-Based Shelters (TOD): Challenges & Potentials “ Public Works and Housing Ministry, 2020), residential property prices in areas around TODs had increased 30 percent. No subsidies for purchasing houses in TODs have been given so far to middle-class workers.

KOMPAS/AGUS SUSANTO

Aerial photo of landed houses in Babelan District, Bekasi Regency, West Java, Thursday (30/9/2021).

"If the market price is not controlled, the prices of houses in TODs, with their strategic location, will continue to increase. As a result, it will be difficult for the lower middle class to buy them," said Eisha.

Transportation access

Meanwhile, Ferry Salanto, senior associate director of research at property consulting agency Colliers International Indonesia, said millennial workers from the middle to upper classes did not have financial issues in buying houses in the city center. According to him, their parents, who were generally well-established, would support them financially in buying a residence from a variety of choices.

“However, the situation is different for millennial workers from the lower middle class. Because it is difficult for them to buy houses in the city center or near their offices, they instead buy houses on the outskirts, [where] the houses are relatively more affordable," said Ferry.

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With this condition, there was a need to provide public transportation access to those who choose to buy houses in suburban residential areas. The various transportation modes must be integrated to reduce travel time.

Regarding the issues related to transportation access, the business development director of PT MRT Jakarta, Farchad H. Mahfud, said that the high prices of urban housing could be overcome by expanding access to integrated transportation to the city outskirts. Transportation networks such as KRL, the MRT and the LRT must also be expanded further. At the same time, public transportation feeder networks, such as feeder buses, should be expanded to suburban residential areas.

(This article was translated by Hendarsyah Tarmizi)