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National Trends in Housing-Production PracticesVolume 2: Indonesia

Table of Contents

Foreword

I. A changing shelter policy

A. Scope and scale of the shelter problem

o 1. Identifying the poor

o 2. Housing stock

o 3. Housing need

o 4. Housing demand

o 5. Housing supply

B. Reorganization of the housing sector

II. Housing supply at the national level

A. Actors in the shelter-delivery process

o 1. Government and public-sector agencies

a. Perum-Perumnas

b. BTN

c. Other public-sector actors

o 2. Actors in the private formal sector

a. Private contractors

b. Financial institutions

o 3. Informal-sector actors

a. NGOs

b. CBOs

c. Cooperatives

d. Individuals/households

B. Housing finance

o 1. Household savings for housing

a. BTN savings

o 2. Housing-credit systems

a. BTN credit schemes

b. P. T. Papan Sejahtera credit schemes

o 3. Incentives for investment in housing

o 4. Subsidies in the housing sector

o 5. Affordability

III. Jakarta


o 1. Housing stock

o 2. Housing needs

B. Actors and housing supply

o 1. Public-sector actors

a. Perum-Perumnas

b. Jakarta housing enterprises

c. Bappem KIP-MHT

d. Central-government agencies

o 2. Private-sector actors

o 3. Other actors

C. Summary and recommendations

IV. Bandung


o 1. Housing stock

o 2. Housing needs

B. Actors and housing supply

o 1. Public-sector actors

a. Perum-Perumnas

b. Bandung Municipality

i. Bandung Urban Development Project (BUDP)

ii. INDAL Pilot Renewal Project

c. Government agencies

o 2. Private-sector actors

o 3. NGOs

a. The Environmental Research Centre (PPLH)

b. The Institute of Community Self-help (LPSM)

o 4. CBOs and cooperatives

a. Tamansari Rental Housing

b. Palasari arisan Housing

c. St. Borromeus Hospital Employee Credit Cooperative

d.. Bina Karya

C. Summary and recommendations

V. Alleviating the housing problem in Indonesia: Conclusions and recommendations

A. Access to credit and affordability

B. Access to land

C. Building regulations

D. "Positive" regulations on housing developments

E. Transport

F. Building materials

G. Decentralization and community participation

Bibliography


List of figures

1. Main actors in housing finance in Indonesia, by income group

Figure 1. Main actors in housing finance in Indonesia, by income group


List of tables

1. Planned Perum-Perumnas and REI housing production (1974-1994)

2. Actual Perum-Perumnas and REI housing production (1974-1991)

3. Population, Indonesia (1961-2000)

4. Population growth, 1961-2000 (average percentage/year)

5. Land area, population, and population density, Indonesia

6. Urban household incomes (1976)

7. Official poverty lines in Indonesia (1976-1990)

8. Urban household incomes, Indonesia (1992)

9. Housing stock, Indonesia (1989)

10. Housing tenure, Indonesia (1989)

11. Size of houses (1989)

12. Housing preferences (1991), by desired type and monthly expenditure class

13. Urban formal-sector housing production, by actors (to 1990)

14. Rural formal-sector housing production, by programme (to 1990)

15. Volume of urban formal-housing production, by actors (to 1991)

16. Settlement-upgrading programmes (1969-1994)

17. Settlement improvement projects (to 1991)

18. Housing production by Perum-Perumnas (1974-1991)

19. REI housing production, by income group (to 1991)

20. BTN funding sources through saving in Repelita-V (1989-1994)

21. Inflation and exchange rates (1976-1992)

22. BTN interest rates (1976-1992)

23. Ownership credit/loan systems of BTN (1992)

24. Papan Sejahtera's interest rates (1992)

25. Average house prices (1992)

26. Population of Jakarta (l990)

27. Housing ownership, Jakarta (1990)

28. Housing needs, Jakarta (l990)

29. Housing production, Jakarta (to 1992)

30. Housing production, Botabek (to 1992)

31. Expected housing demand, Jakarta (1990-1995)

32. Perum-Perumnas housing production, Jakarta (to 1992)

33. Rental flats owned by DKI Jakarta (1990)

34. REI housing developments in Jabotabek, by source of finance (to 1992)

35. Housing stock, Bandung (1992)

36. Perum-Perumnas housing production, Bandung (to 1992)

Table 1. Planned Perum-Perumnas and REI housing production (1974-1994)Repelita Perum-Perumnas Private and REI Total

II 73,000 - 73,000III 100,000 70,000 170,000IV 140,000 160,000 300,000V 122,500 327,500 450,000

Total 435,500 557,500 993,000Source: CBS, 1989a; 1992a; 1992c; and Sardjono (1986).

Table 2. Actual Perum-Perumnas and REI housing production (1974-1991)Repelita Perum-Perumnas Private and REI Total

II-IV 198,594 698,911 897,505Va 17,962 243,441 261,403

Total 216,556 942,352 1,158,908a: Up to 1991Source: CBS, 1989a; 1992a; 1992c; Sardjono, 1986.

Table 3. Population, Indonesia (1961-2000)

YearUrban

Rural

Total MillionMillion Percentage Million Percentage1961 14 14.4 83 85.6 971971 21 17.6 98 82.4 1191980 33 22.3 115 77.7 1481990 55 30.6 125 69.4 1802000 a 85 38.6 135 61.4 220

a: Projected.Source: CBS, 1992c; 1992d.

Table 4. Population growth, 1961-2000 (average percentage/year)Period Urban Rural Total

1961-1971 4.14 1.68 2.071971-1980 5.15 1.79 2.451980-1990 5.24 0.84 1.981990-2000a 4.45 0.77 2.03

a: Projected.Source: Based on CBS, 1992d.

Table 5. Land area, population, and population density, Indonesia

IslandArea

(percentage)Population

(percentage)Population density

(persons/km²)Java 7 60 814

Nusa T enggara 5 6 115Sumatera 25 20 77Sulawesi 10 7 66

Kalimantan 28 5 17Irian Jaya 22 1 7

Other islands 3 1 n.a.Totals 100 100 89

Source: CBS, 1992d:39-40.

Table 6. Urban household incomes (1976)

Income groupPercentage of

total populationMonthly income

Rp.'000 US $Highest 2 > 90 > 214Middle 8 50-90 119-214

Moderate 20 30-50 71-119Low 30 10-30 24-71

Lowest 40 < 10 < 24Source: Modified from Prisma Magazine, 1986b:12-23.

Table 7. Official poverty lines in Indonesia (1976-1990)

Year

Per capita poverty line

Percentage of population living be lowthe poverty lineUrban area

Rural area

Rp. $ Rp. $ Urban areas Rural areas Total1976 4,522 11 2,849 8 39 40 401978 4,969 12 2,981 8 31 33 331980 6,831 12 4,449 8 29 28 291981 9,777 15 5,887 9 28 26 271984 13,731 13 7,746 7 23 21 221987 17,381 11 10,294 6 20 16 171990 20,614 11 13,925 7 17 14 15

Source: CBS, 1989a; 1992d; Swasembada magazine, 1988a.

Table 8. Urban household incomes, Indonesia (1992)

Income groupPercentage of urban

populationMonthly incomes

Equivalent to:Rp.'000 US $High 5 > 3,500 > 1,748 Business persons

Middle 15 1,250-3,500 619-1,748 ProfessionalsModerate 20 750-1,250 371-619 3rd and 4th group of civil servants

Low 40 (Upper) 450-750 228-371 2nd group of civil servants (Lower) 100-450 50-228 1st group of civil servants

Lowest 20 < 100 < 50 Informal sector below poverty lineSource: BTN, 1992a; CBS, 1992d; Herlianto, 1993; REI, 1990.

Table 9. Housing stock, Indonesia(1989)Area Number of housing units Percentage

Urban 10,826,352 27.8Rural 28,094,808 72.2Total 38,921,160 100.0

Source: CBS, 1990:14.

Table 10. Housing tenure, Indonesia (1989)Type of tenure Urban areas Rural areas Total

Own 65.7 92.4 85.0Lease 12.0 0.4 3.6

Rented 8.0 0.9 2.9Instalment plan 1.0 0.1 0.3

Official 3.8 1.5 2.1Rent free 5.3 2.5 3.3

Other 4.1 2.2 2.8Total 99.9 100.0 100.0

Source: CBS, 1990:58-63.

Table 11. Size of houses (1989)Floor area (m²) Urban areas Rural areas Total

< 20 8.4 2.9 4.420-29 10.3 10.0 10.130-39 11.8 15.4 14.440-49 15.3 19.0 18.050-69 19.1 22.5 21.570-99 19.2 18.0 18.3

100-149 9.4 8.0 8.4150-199 3.6 2.4 2.7200-299 1.9 1.4 1.6

300 + 1.1 0.5 0.6Total 100.1 100.1 100.0

Source: CBS, 1990:144-149.

Table 12. Housing preferences (1991), by desired type and monthly expenditure class

Expenditure classSize of unit (m²)

Maisonette Total18 21 27 36 45 51 70 90 120 150 250 300< 30 15 53 5 - 16 3 8 - - - - - - 100

30-39 24 13 12 17 20 5 6 - - - - - 3 10040-49 20 17 13 24 14 3 6 2 - - - 1 - 10050-74 19 18 10 25 17 6 5 1 - 1 - - - 10275-99 14 20 10 22 15 6 7 2 1 1 1 1 - 100

100-149 12 24 11 23 14 5 8 1 1 1 1 1 - 102150-199 6 14 10 25 19 5 12 3 1 1 1 2 - 99200-299 3 12 9 28 16 8 14 4 3 1 2 1 1 102300-399 2 4 5 22 17 6 27 3 5 7 - 3 - 101400-499 - 7 4 19 21 5 20 2 11 4 - 7 - 100

500 + - 6 1 14 23 6 23 8 3 9 - 9 1 103Total 11 17 10 24 16 6 10 2 1 1 1 1 1 101

Source: CBS, 1992a:356-359.

Table 13. Urban formal-sector housing production, by actors (to 1990)Repelita II III IV V Total

Perum-Perumnas/BT N 50,670 81,323 69,581 7,691 209,265Developer/BT N 2,742 104,563 255,175 52,198 414,678

House-shop/BT N - - 2,291 - 2,291Papan Sejahtera - 1,509 12,790 2,266 16,565

Private bank - - 2,797 - 2,797Non-credit 1,760 175,173 17,935 - 194,868

Total 53,412 187,395 342,634 62,155 645,596Source: Ministry of Housing, 1990:196, 219; 1991:154.

Table 14. Rural formal-sector housing production, by programme (to 1990)Repelita II-III IV V

P2LDT (units) - 190,395 -P2LDT (villages) - 7,946 -

T ransmigration - 597,502 -Social housing - 12,190 -

Source: Ministry of Housing, 1990:196, 219; 1991:154.

Table 15. Volume of urban formal-housing production, by actors (to 1991)Built by Number of units Percentage

Perum-Perumnas 216,556 18.7Private developers with BT N credit facilities (including members of REI) 725,966 62.6

REI for the middle- and high-income groups with assistance of private banks such asPapanSejahtera 216,386 18.7

Total 1,158,908 100.0Source: CBS, 1992a.

Table 16. Settlement-upgrading programmes (1969-1994)

PeriodKIP-Urban housing(number of towns)

Rural housing(number of units)

Renewal(number of towns)

1969-1974 1 - -1974-1979 2 15,000 -1979-1984 200 90,000 11984-1989 400 150,000 41989-1994 500 300,000 1401969-1994 1,103 555,000 145

Source: Sardjono, 1986.

Table 17. Settlement improvement projects (to 1991)Programme Number of citie s/villages Hectares Households

KIP 212 981 n.a.P2LPK 981 12,250 n.a.P2LDT 441 21,194 56,226

Source: Ministry of Housing, 1990.

Table 18. Housing production by Perum-Perumnas (1974-1991)

Type of dwell ingSize of

dwell ing m²

Number of unitsPercentage of

totalRepelita-II Repelita-III Repelita-IVRepelita-V(1989-90)

Total1974-1990

Core houses < 27 20,272 50,361 44,635 3,653 118,921 56.8Simple/modest houses > 27 30,398 28,002 19,626 4,038 82,064 39.2

Flats/apartments 18-54 - 2,960 5,320 - 8,280 4.0Total 50,670 81,323 69,581 7,691 209,265 100.0

Source: CBS, 1992a:6; Ministry of Housing, 1990:57.

Table 19. REI housing production, by income group (to 1991)Type of housing by RepelitaII-IV

(actual)RepelitaIV(planned)Income group Floor area m²

High > 200 - -Middle 70-200 11,337 3,903

Moderate 36-70 92,957 21,498Low 12-36 358,178 134,777

Source: BKPN, 1991:22-23; Ministry of Housing, 1991:154.

Table 20. BTN funding sources through saving in Repelita-V (1989-1994)Source of funds Percentage of total funds Rp. billions US$ mill ions

Tabanas 9.96 223.00 119.89T UM/Pradana 8.00 180.00 96.77

Deposit 4.56 102.65 55.19Mortgage bonds 11.12 250.00 134.41

Total 33.64 755.65 406.26Source: Amir Karamoy, Vice Director of REI, 1990.

Table 21. Inflation and exchange rates (1976-1992)

Date of decisionInterest rate by size of unit, m²

< 21 27-36 45 70+1976 5 5 5

1979 April 5 9 91986 April 9 12 151987 Sept. 9 12 151989 April 12 16 181990 April 12 16 17.51990 Sept. 12 16 17.5 18.51990 Oct. 12 19 19-21 22

1991 March 12 21-23 24-26 27-281992 July 12/10a market market market

a: "Simple houses" and RSS respectively.Source: BTN, 1992c.

Table 22. BTN interest rates (1976-1992)

YearInflation rate(percentage)

Exchange rate(Rp./US$)

1976 19.8 4211977 n.a n.a1978 8.1 n.a1979 21.9 n.a1980 18.5 6291981 12.2 6441982 n.a 6931983 n.a 7021984 10.4 1,0751985 n.a 1,0301986 9.0 1,6501987 9.0 1,6501988 9.0 1,7001989 8.0 1,8001990 9.0 1,8601991 7.0 1,9501992 5.0 2,000

Source: CBS, 1992d; Swasembada Magazine, 1988a.

Table 23. Ownership credit/loan systems of BTN (1992)

PackageIncomegroup

Monthly income (Rp.'000)

House size(m²)

Repaymentperiod(years)

Interest(percentage per

annum)Very simple house ownership credit (KPRSS) lowest < 150 21 10

lower-low < 200 36 10House-ownership credit (

KPR-Griya) (for modest-qualityhouses)

corelower-low < 450 1 12upper-low < 750 21 15

mediumupper-low < 750 27 21moderate < 1,250 36 21

large middle > 1,250

45 & 70 23< 5 23

5-10 23.510-20 24

Serviced-plots ownership credit (KP-KSB)(self-help construction) lowest 150 12

House-shop ownership credit (KP-Ruko) (for individual use)

small < 5 23medium 5-10 23.5

10-20 24Improvement credit (KUPARA) (for existing

houses)< 5 23

5-10 23.5Housing development credit (KSG) (for people

with a plot of land)< 5 23

5-10 23.510-20 24

Rental house credit (KGS) (building of flats orhouses to be rented)

< 5 235-10 23.5

10-20 24Construction credit (KYG) (for developers) 25Company housing (KPP) (for companies to

build houses for they employees) credit interest +1Emergency credit (K. Swadana) (for

emergencies regardless of deposit status) deposit interest +2Source: Based on BTN, 1992d:1-3.

Table 24. Papan Sejahtera's interest rates (1992)

Year< Rp.50 mill.

KPR 50< Rp.200 mill.

KPR 200Construction

KRBRenovation

KKPR1985 19 n.a. n.a. n.a.1990 23 25 26 251992 22 24 25 24

Source: Papan Sejahtera, 1992a; Pikiran Rakyat Newspaper, 1992.

Table 25. Average house prices (1992)

House type Unit size (m²) Plot size (m²) Eligible income groupsPrice (Rp. mill ion)

Perum-Perumnas Private deve lopersVery simple 21 54 lower-low 3.5 -Core house 15 60 lower-low 5-6 -

Simple 21 72 lower-low 6-7 8-10 27 90 upper-low 7-9 10-15

Medium 36 100 upper-low 9-12 15-20 45 120 moderate 12-15 20-40 54 150 middle 15-20 40-50 60 160 middle 20-25 50-60

Large 70 200 middle 25-30 60-80 90 250 high - 80-100 110 300 high - > 100

Source: Herlianto, 1993.

Table 26. Population of Jakarta (l990)

RegionArea(km²) Population

Population density(persons/km²)

Number ofhouseholds

Household size(persons)

South 145.4 1,905,004 13,102 392,474 4.85East 187.7 2,064,495 10,999 444,975 4.64

Central 47.9 1,074,752 22,437 224,594 4.79West 126.1 1,815,316 14,396 383,880 4.73

North 154.1 1,362,948 8,845 294,293 4.63Total 661.2 8,222,515 12,434 1,740,216 4.72

Source: DKI (1991a, 1991b).

Table 27. Housing ownership, Jakarta (1990)O wnership Number Percentage

Privately owned 1,052,399 79.8Rented 94,202 7.1

Contracted/leased 152,180 11.5Boarding house 19,847 1.5

Total 1,318,628 99.9Source: DKI, 1991a.

Table 28. Housing needs, Jakarta (l990)

RegionHousing stock

(units)Households

per unitHousing need

(units)Housing shortage

(units)South 346,449 1.13 372,061 25,612

East 339,347 1.13 370,812 31,465Central 163,318 1.38 187,161 23,843

West 291,483 1.32 319,900 28,417North 223,031 1.32 245,244 22,213Total 1,318,628 1.32 1,450,178 131,550

Source: DKI, 1991a; 1991b.

Table 29. Housing production, Jakarta (to 1992)

ActorType of housing

Total PercentageCore Simple Medium Flat O thersPerum-Perumnas 7,142 - - 4,559 1,093 12,794 31.9

DKI Jakarta - - - 3,634 - 3,634 9.1REI 14,172 2,615 6,630 250 - 23,667 59.0

Total 21,314 2,615 6,630 8,443 1,093 40,095 100.0Source: BTN (1992a); REI (1990).

Table 30. Housing production, Botabek (to 1992)Region Perum-Perumnas REI Total

Bogor 22,500 8,726 31,226T angerang 16,685 13,213 29,898

Bekasi 17,044 16,635 33,679Total 56,229 38,574 94,803

Source: BTN, 1992a; REI, 1990.

Table 31. Expected housing demand, Jakarta (1990-199S)

Type ofunits

Sizem²

Targetincome

group (Rp.'000)

Housing deve lopments (thousand units)

PD-SJ Perum-Perumnas REIHouseholds/communitie s Total

Core 18 < 100 8 5 2 5 20Small 21 100-150 12 10 8 10 40

36 150-200 10 10 9 16 45Medium 45 200-250 8 9 10.5 32.5 60

54 250-300 3 3 8 28 42 70 300-500 3.5 2.5 6 33 45

Large >70 > 500 2 1 4.5 27.5 35Total Number 46.5 40.5 48 152 287

Total Percentage 16.2 14.1 16.7 53.0 100.0Source: DKI (1991a).

Table 32. Perum-Perumnas housing production, Jakarta (to 1992)

LocationSub-core

15m²Core21m²

Flat housing (unit size )

Duplex

Maisonette70m² Total18m² 21m² 36m² 54m² 45m² 54m²

Klender 190 6,952 - - 1,216 64 524 202 367 9,515Kebon Kacang - - - 240 230 66 - - - 536T anah Abang - - - - 1,271 - - - - 1,271

Kemayoran - - 704 480 288 - - - - 1,472

Total 190 6,952 704 720 3,005 130 524 202 36712,79

4Source: Perum-Perumnas and DKI, 1991a.

Table 33. Rental flats owned by DKI Jakarta (1990)Location Agency Stories Type (m²) Units

Pondok Kelapa PD-SJ 2 14 & 16 140Cipinang Besar PD-SJ 2 14 & 16 144Pondok Bambu PD-SJ 2 14, 16 & 28 132

Cengkareng PD-SJ 2 14 & 16 114Karang Anyar PD-SJ 4 18 & 27 350

Jati Rawasari PD-SJ n.a. n.a. 146Pondok Sarana Karya PD-SJ 4 14 & 16 152

T ambora PD-SJ 4 18 463Penjaringan PD-SJ 4 18, 36 & 54 933

Bermis-Industri PD-SJ 4 48 64Penjaringan BPL Pluit 4 36 400

Pulo Mas YPM 4 45 & 54 596Total 3,634

Source: DKI, 1991a.

Table 34. REI housing developments in Jabotabek, by source of finance (to 1992)

Region BTN Papan SejahteraO ther sources

TotalNon-KPR House-shop Flats O therDKI-Jakarta 14,172 1,936 4,594 2,615 230 20 23,567

T angerang 10,139 1,923 815 318 - 18 13,213Bogor 6,345 1,780 571 30 - - 8,726Bekasi 12,127 2,431 1,861 216 - - 16,635Total 42,782 8,070 7,841 3,179 230 38 62,141

Source: REI, 1990.

Table 35. Housing stock, Bandung(1992)Condition of units Number Percentage

Permanent 218,561 64.7Semi-permanent 82,596 24.4

T emporary 36,840 10.9Total 337,997 100.0

Source: Unknown, 1992a:16.

Table 36. Perum-Perumnas housing production, Bandung (to 1992)

Location

Type of units

TotalRSS21m²

Core house21m²

Simple house27-70m²

Sukaluyu - - 150 150Sadang Serang - 504 360 864

Cijerah - - 460 460Sarijadi non-flat - 1,950 1,151 3,101

Sarijadi flat - - 864 864Kopo - - 354 354

Cibuntu - - 339 339Antapani - 4,949 754 5,703

Rancaekek 209 2,298 455 2,962Total 209 9,701 4,887 14,797

Source: Herlianto, 1993 (citing Perum-Perumnas, Bandung branch).


List of acronyms and special termsADB Asian Development BankArisan Collective lotteryBappeda Municipal Planning and Development Agency (Badan Perencanaan dan Pembangunan Daerah)Bappem Development Execution Board (Badan Pelaksana Pembangunan) Bappenas National Planning and Development Agency (Badan Perencanaan dan Pembangunan Nasional) BAWS Bandung Area Water SupplyBKPM Capital Investment Coordinating Body (Badan Koordinasi Penanaman Modal)BKPN National Housing Policy Board (Badan Kebijaksanaan Perumahan Nasional)Botabek Bogor-Tangerang-Bekasi regionBPD Local Development Bank (Bank Pembanguan Daerah)BPN National Land Agency (Badan Pertanahan Nasional)BTN State Saving Bank (Bank Tabungan Negara)BUDP Bandung Urban Development ProjectBUTP Bandung Urban Transportation ProjectCBLCH Community-based low-cost housing CBO Community-based organization CBS Central Bureau of Statistics Desa VillageDKI Capital Special Area, Municipality of Jakarta (Daerah Khusus Ibukota)ESCAP United Nations Economic and Social Commission for Asia and the PacificGBHN State National Development Goal (Garis Besar Haluan Negara) gotong royong Mutual self-helpGSS Global Strategy for Shelter to the Year 2000IBRD International Bank for Reconstruction and Development, the World BankINDAL Industri Dalam streetIYSH International Year of Shelter for the HomelessJabotabek Jakarta-Bogor-Tangerang-Bekasi urban agglomeration JPR Public Housing Agency (Jawatan Perumahan Rakyat) Kabupaten Rural municipalityKampung Village in urban area Kecamatan DistrictKelurahan Sub-district/villageK. Swadana Emergency credit (BTN)KGS Rental house credit (BTN)KIP Kampung Improvement ProgrammeKK Construction and improvement credit (Kredit Konstruksi)KKPR Credit for housing construction and improvement (Kredit Konstruksi dan Perbaikan Rumah)

(Papan Sejahtera)Kotamadya Urban municipality (city status)KP-Ruko House-shop ownership credit (BTN)KPKSB Empty/serviced plots ownership credit (Kredit Pemilikan Kapling Siap Bangun)KPP Company housing credit (BTN)KPR House ownership credit (Kredit Pemilikan Rumah) KPR-Griya House ownership credit (BTN)KPRSS Very simple house ownership credit (BTN)KRB New home construction credit (Kredit Rumah Baru) (Papan Sejahtera)KSG Housing development credit (BTN)KUD Rural unit cooperative (Koperasi Unit Desa)KUK Small economic activity credit (Kredit Usaha Kecil)KUPARA Improvement credit (BTN) KYG Construction credit (BTN)LPMB Regional Housing Centre (Lembaga Penyelidikan Masalah Bangunan)LPSM Institute of Community Self-help (Lembaga Pengembangan Swadaya Masyarakat)NGO Non-governmental organizationP2LDT Rural Housing Improvement Programme

P2LPK Urban Housing Pioneering Project (Proyek Perintis Perbaikan Lingkungan Perumahan Kota)P3KT Integrated Urban Infrastructure Development Programme (Proyek Pembangunan Prasarana Kota

Terpadu)PD-SJ The housing company of DKI (Perusahaan Daerah Saran Jaya) Perum-Perumnas National Urban Housing Development Corporation (Perusahaan Umum Perumahan Nasional)PITB Building Information Centre (Pusat Informasi Tehnik Bangunan) PPLH Environmental Research Centre (Pusat Penelitian Lingkungan Hidup)REI Indonesian Association of Real Estate Developers (Real Estate Indonesia)Repelita Five Year Development PlanRp. RupiahsRSS Very simple house (Rumah Sangat Sederhana) SP3L Location Principle Approval Tabanas National SavingUNDP United Nations Development ProgrammeYKP Housing Bank Foundation (Yayasan Kas Pembangunan)YSS Sugyapranata Social Foundation


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Herlianto. 1987. "Kampung Improvement Project", paper presented at the National KIP- Course, Directorate ofHousing, Ministry of Public Works, Jakarta.

Herlianto. 1990a. "Experience with the project approach to shelter delivery for the poor in Indonesia", case studyprepared for UNCHS, Nairobi.

Herlianto. 1990b. "The emerging role of non-governmental organizations " , paper presented at the InternationalCongress of the Association of the Major Metropolises, Melbourne, October.

Herlianto. 1993. "National trends in housing production practices in Indonesia". Case study prepared for UNCHS(Habitat), Nairobi.

Jakarta Capital City Government. 1976. Jakarta's Kampung Improvement Programme , in the Context of City SettlementProblem, Jakarta.

Llewelyn-Davies, Kinhill, Sycip, Gorres, Velayo & Co. 1979. Bandung Urban Development and Sanitation Project, Finalreport.

LP3ES. 1982. Studies on the impact of Kampung Improvement on Low Income People in Jakarta, Jakarta.

Ministry of Cooperatives. n.d. Ideas Regarding Housing Provision by Cooperatives, Jakarta.

Ministry of Housing. 1989. Decree on Housing Development Task Force, Jakarta, Office of the State Minister. Ministryof Housing. 1990. Housing Development 1990, Jakarta, Office of the State Minister .

Ministry of Housing. 1991. Housing for All People, book prepared by staff of the State Minister of Housing, Jakarta.

Ministry of Housing. 1992. Reports ~n Housing for Cabinet Meetings, Jakarta, Office of the State Minister .

Ministry of Housing. n.d. "Information Book" Jakarta, Office of the State Minister of Housing.

Ministry of Public Works. 1982. Kampung Improvement Programme (KIP), Jakarta, Directorate General of HumanSettlements.

Ministry of Public Works. 1984. Development Programme of the Directorate General of Human Settlements in Repelita-IV, Jakarta.

Ministry of Public Works. 1985. Definition of Low Cost Housing , Jakarta.

Ministry of Public Works. 1986. Second Bandung Urban Development Project, Feasibility Study, Jakarta

Ministry of Public Works. 1989. Development Programme of The Directorate General of Human Settlements in Repelita-V, Jakarta.

Ministry of Public Works. Annual Reports of the Directorate General of Human Settlements, Jakarta.

P.T. Margahayu Raya. 1990. Margahayu Raya Housing Development Report, Bandung.

P.T .Papan Sejahtera. 1992a. Leaflets.

P.T. Papan Sejahtera. 1992b. Prospectus, June 6.

Perum-Perumnas. 1985. Klender Flat Housing Project, Jakarta.

Perum-Perumnas. 1985. Klender Site and Services Project.

Perum-Perumnas. 1987. Environmental Impact Study of the Klender Housing Project, Jakarta, Perum-PerumnasEvaluation Team.

Perum-Perumnas. 1989a. Annual Report 1987-1989, Jakarta.

Perum-Perumnas. 1989b. Corporate Plan 1989-1994, Jakarta.

Perum-Perumnas. 1989c. Kemayoran Ex-Airport Flat Housing.

Perum-Perumnas. 1989d. National Urban Housing Development Program in Pelita-V, Jakarta.

Perum-Perumnas. 1992. Perum-Perumnas,17 years.

Perum-Perumnas. n.d. Brochure of Bandar Kemayoran, Jakarta.

Pikiran Rakyat. 1987. Housing and Its Problem, supplemental publication to welcome the International Year of Shelter,Bandung, August.

Pikiran Rakyat. 1988. Housing and Its Problem, supplemental publication to welcome the opening of Papan SejahteraOffice in Bandung, Bandung, September .

Pikiran Rakyat. 1992. "Papan Sejahtera decreased its interests " , Bandung, 31 October.

Prisma. 1986a. "Housing for people: not a dream?", Prisma, No.5, May.

Prisma. 1986b. "Towards the take off of national development", Prisma, VI 6th edition.

Prisma. 1988. Non-governmental organization, Prisma, No.4.

Prospek. 1991. "Ten most expensive cities", April 13.PTL. 1991. "Community based low cost housing", unpublishedinception report of Project INS/89/006.

REI. 1989. Decree of the National Congress of the Association of Real Estate in Indonesia, Jakarta.

REI. 1990. Statistics on 1990 Housing Development by Real Estate Indonesia.

Sardjono. 1986. "Towards the take off of national housing development", Prisma 5, May.

Struyk, Raymond J., and others 1990. The Market for Shelter in Indonesia Cities, Jakarta, Hasfarm Dian Consultant, andWashington, D.C., The Urban Institute.

Sugyapranata Social Foundation. 1986. Schedule of Profile Data, Semarang.

Swasembada. 1988a. "Years without devaluation?" Swasembada, No.3/IV , June.

Swasembada. 1988b. "Uncovering the real estate business", Swasembada No.3/IV , June.

University of Indonesia. 1990a. Executive Summary of Klender Evaluation Study , Jakarta, Faculty of Economics.

University of Indonesia. 1990b. Report on the Aspiration of Flat Housing Dwellers at Klender Housing Project, Jakarta,Faculty of Economics.

University of Indonesia. 1991. Projection of Indonesian Population: 1990-2020, Jakarta, Demographic Institute, Facultyof Economics.

Unknown. 1992a. "Infrastructure development planning of Bandung City", paper presented at the Public WorksTraining, Bandung, 2 October .

Unknown. 1992b. "Urban infrastructure development plan for Bandung City", paper presented by the head of the

Planning Board at the Housing Seminar in Bandung, 3 October 1992.

Ustianto, M. 1990. The Social Problem Gap in Jakarta Qty and Social and Humanitarian Services, Jakarta.

Warta Perumnas. 1983a. "The impact of high rise housing", Warta Perumnas 6 April.

Warta Perumnas. 1983b. "Urban Renewal Project", Warta Perumnas No.3, Jakarta.

Warta Perumnas. 1989. "Market orientation of Perum-Perumnas in Pelita-V", Warta Perumnas No.2, July-August.Yanuati, Nunun. 1990. Housing Case Study: West Margahayu Raya Project, Bandung.

Yanuati, Nunum. 1990. Housing Case Study: West Margahayu Raya Project, Bandung.


Notes

1. The Regional Housing Centre, UN-RHC/LPMB, has since been renamed the Institute of Human Settlements(Puslitbang Pemukiman).

2. About 200 YKPs have so far been established, and they were responsible for the construction of a total of13,138 housing units during the 1951-1981 period. For various reasons, in particular financial ones but also dueto the expansion of Perum-Perumnas, only two YKPs operate successfully today, i.e., in the cities of Surabaya(in east Java) and Klaten (in central Java).

3. Administratively Indonesia is subdivided into 27 provinces. These are subdivided into 241 rural municipalities(kubupaten) and 55 urban municipalities (kotamadya). The 296 municipalities are subdivided in a total of 3601districts (kecamatan), which in turn are subdivided into 66,979 villages in rural areas (kelurahan).

4. Approximately 60 per cent of the total urban population live in kampung areas.

5. The National Land Agency (BPN) was established in 1990 to pursue these objectives.

6. This compares well with the size of Bandung city before the extension in 1987 (when its area was doubled from8000 to 17,000 hectares).

7. This equals approximately $US 263 million (based on current exchange rates, see table 22).

8. See section II.B.2.a for more details on the various credit schemes offered by BTN .

9. This may seem overtly optimistic if compared with past experience.

10. For details on the CBLCH scheme, see section II.A.3.b.

11. Average household size fell from 5.36 in 1976 (Llewelyn-Davies and others, 1979).

12. So far, the Housing Section of the Municipality has registered 74 housing project locations in Bandung city.Only seven of these were Perum-Perumnas projects.

13. The Antapani development was discussed in section IV.B.I.a above.

14. The minimum monthly income required to qualify was adjusted upward in 1990 - to about Rp.300,000 - implyingthat parts of the lower-low-income group could qualify. Yet, the additional requirement of minimum monthlyinstalments of Rp.100,000 implies that, in practice, only upper-low- and moderate-income groups would qualify.

15. For a brief discussion of the arisan system, see section II.A.3.b.

ABOUTNational Trends in Housing-Production

PracticesVolume 4: Indonesia

HS/311/93 EISBNE 92-1-131502-6 (electronic version)

Text source: UNCHS (Habitat) printed publication: ISBN 92-1-131236-1 (published in 1993).This electronic publication was designed/created by Inge Jensen.

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Foreword

In most developing countries today, the provision of shelter is grossly inadequate. This is so despite severaldecades of direct government intervention in the shelter sector. The adoption by the United Nations GeneralAssembly of the Global Strategy for Shelter to the Year 2000 (GSS) in 1988 implied a global recognition of the severityof the housing problem. Since the public sector has shown itself unable to meet the increasing housing demand, theGSS calls for the adoption of new roles and responsibilities of the various actors in the shelter-deli very process. Itdoes not, however, propose that governments should withdraw from housing. On the contrary, the GSS placessignificant responsibilities on the public-sector agencies for creating an enabling environment and ensuring theavailability of shelter for all. By emphasizing the need for flexibility and local initiative in designing the new housingpolicy, it recognizes that the response of government in various countries may differ, depending on their respectivehousing conditions and the state of administrative and regulative system.

That is the point of departure for this publication, which is a series of four volumes on national trends inhousing-production practices in India, Indonesia, Mexico and Nigeria, respectively. All four countries have recentlyadopted new national housing policies that incorporate the enabling approach advocated in the GSS. Thesepublications identify problems encountered and lessons learned during the process of initiating enabling shelterstrategies. Yet, because the experiences in different countries in many ways are unique, it is necessary to discuss theexperiences gathered against the background of a more comprehensive discussion of the shelter-delivery process inthe individual countries. None of the four publications in this series thus attempts to compare the experiences ofdifferent countries. That has been done - with a particular focus on the lowest income groups - in a separatepublication entitled National Experiences with Shelter Delivery for the Poorest Groups.

The four volumes take a close look at the implementation of the GSS at the national level. They also reviewlessons at the sub-national level, by presenting the experience of the cities of Bombay, Calcutta and Delhi in India;Jakarta and Bandung in Indonesia; Mexico City, Ciudad Obregon and Jalapa in Mexico; and Lagos in Nigeria. Aparticular emphasis of all four publications is the presentation of data documenting the performance of the sheltersector at large and of the various actors involved therein.

Each of the four volumes consists of four main parts. The first part takes a close look at the development ofnational shelter policies and strategies in the light of the introduction of enabling shelter strategies. It also describesthe scope and scale of the shelter problem in each of the four countries. The second part analyses the changing rolesand responsibilities of the various actors in the shelter-delivery process, including relevant financial institutions andinstruments. It also provides figures on actual housing production at the national level. The third part takes a closerlook at the above issues at the city level. The fourth and concluding part, is just that, a conclusion to the abovediscussion. The chapter highlights obstacles to an effective housing supply, as well as particular innovativeapproaches towards alleviating the housing problem in the country.

The main conclusion that can be drawn from these studies is that the shelter problem today in most developingcountries is worse than it was before massive public-sector interventions were initiated two to three decades ago. Theexample of Indonesia can serve as a good illustration of the rather limited success of two decades of direct shelterprovision by the public sector. Total public-sector housing supply during the entire 1974-1991 period is less than theannual housing need created by population growth alone. Furthermore, there are signs in all four countries thatpublic-sector involvement in housing is being reduced, i.e., while the volume of units produced is increasing,public-sector investments in housing are decreasing. This indicates a trend where the focus of formal-sector housingproduction is turning away from the production of ready-to-move-in units and towards the provision of a wide menuof actions that lead to the construction of a dwelling unit. This results in a situation in which more units (althoughqualitatively different) can be produced with the same amount of funds. Yet, if the total formal-sector investment isreduced, this may indicate the beginning of a trend where the importance of shelter is being reduced rather thanstrengthened.

However, the picture is not altogether bleak. The four publications also show examples of how the shelterproblems can be effectively addressed. We should, nevertheless, keep in mind that in any market, choice is a positivefunction of income. The consequence is that in a situation of housing shortage, the poor have no choice in housing atall. Any strategy to alleviate the shelter problem should keep this in mind. Unless housing supply is fully able to meetthe need, direct interventions are required if the needs of the poorest groups are to be addressed.

We gratefully acknowledge the contribution of Ir. Herlianto for the preparation of the case study on which thispublication is based.

Dr. Wally N'DowAssistant-Secretary-General,

United Nations Centre for Human Settlements (Habitat)


Chapter I. A changing shelter policy

The first major involvement of the Government of Indonesia in the housing - delivery process was theconvening of a Public Housing Congress in 1950. One major result of the Congress, besides receiving the support ofthe President, was that efforts were made to establish housing corporations in every province in Indonesia. A PublicHousing Agency (JPR) was founded two years later to initiate housing research, policy development and technicalguidance, and to develop a housing-finance system. A Regional Housing Centre (1) was established in 1955 inBandung, in cooperation With ESCAP, to do housing research. Furthermore, a Housing Board was founded by thethen Minister for Public Works and Energy, to develop a housing-finance system. The Housing Board encouraged theestablishment of Housing Bank Foundations (YKPs) (2) in every big city (kotamadya) in the country to build a nationalhousing mortgage loan system. (3)

In the State National Development Goal (GBHN) of 1960, housing was regarded as an important factor, and itwas developed as a part of the Community Welfare Programme under the Ministry of Social Affairs. In 1961, a HousingBank was developed to serve the public housing sector, and in 1963 a Presidential Decree established a HousingPlanning Board (Badan Perancang Perumahan) chaired by the Minister of Public Works. The first Housing PrincipalLaw (Undang-Undang Pokok Perumahan) was formulated in 1964. It states that

"... housing is one of the basic ingredients of people's welfare; (and, further more, that) every citizen has the right toreceive and to enjoy appropriate housing, in accordance with social, technical, security, healthy, and ethicalnorms. "

The treatment of housing issues in the first five-year development plan (Repelita-I: 1969-1974) wasconcentrated on research on housing technology, guidance, institution building and finance. In addition, some 2000prototype houses were built during this period, under special instruction of the Minister of Public Works, as apreparation for the formal housing programme which was to be initiated in Repelita-II. A National Housing Policy andDevelopment Financing Workshop convened in 1972, became a milestone for the extensive housing programmes in thefollowing years.

The first formal housing development started in Repelita-II (1974-1979). In the first year of Repelita-II, five newhousing bodies were established: the National Housing Policy Board (BKPN), the National Urban HousingDevelopment Corporation (Perum-Perumnas), the State Savings Bank (BTN), the Indonesian Association of RealEstate Developers (REI) and the Building Information Centre (PITB).

In Repelita-III (1979-1984), two important events should be noted. These were the establishment of a privatesector financial institution, P.T. Papan Sejahtera, to cater to the needs of the middle- and higher-income groups, andthe appointment of a Junior Minister for Housing, under the Minister of Public Works.

Repelita-IV (1984-1989) can be seen as the first official recognition of the private sector's role in housingproduction. This is the first development plan where the planned production of the private sector exceeds that ofPerum-Perumnas. The real production of the private sector had then exceeded that of Perum-Perumnas for severalyears (see tables 1 and 2 ). Another important occurrence during Repelita-IV (in 1984) was the transformation of theJunior Minister for Housing into an independent State Minister of Housing outside the structure of the Ministry ofPublic Works.

Despite these interventions in the housing market, the gap between housing supply and housing demand inIndonesia is still widening. The International Year of Shelter for the Homeless (IYSH), promoted by the United Nationsin 1987, and the adoption of the Global Strategy for Shelter to the Year 2000 (GSS) by the General Assembly of theUnited Nations in 1988 inspired Indonesian housing authorities to develop new insights into how to address thehousing problem. The promotion of the IYSH and the adoption of the GSS occurred during the Indonesian effort toformulate its fifth five-year development plan, known as Repelita-V (1989-1994). A new housing policy was developedand - in line with the recommendations of the GSS - a central theme of the new policy was the changed role of theGovernment, from being a "provider" to becoming an "enabler. "

This change of policy is discussed at length in section I.B . The remainder of this introductory chapter reviewsthe scope and scale of the shelter problem in Indonesia. Chapter II discusses the shelter-delivery process in Indonesiaat large, while chapters III and IV take a closer look at the shelter-delivery process in two of the three largest cities inIndonesia, Jakarta and Bandung. The last chapter summarizes the findings.


Chapter I. A changing shelter policyA. Scope and scale of the shelter problem

The root of the demand side of the housing problem in Indonesia is four-fold, and can be summarized as beingone of population size, population growth, spatial distribution of population and the rate of urbanization (see tables 3,4 and 5 for details):

Indonesia's population numbered 180 million in 1990, making Indonesia the fourth most populated country inthe world. The population in the year 2000 is estimated to 220 million.

The population increased by an annual rate of 1.98 per cent during the 1980-1990 period, down from 2.32 percent during the 1970-1980 period.

60 per cent of all Indonesians live on the island of Java (which makes up only 7 per cent of the total landarea). The population density on Java in 1990 was 814 persons per km2, while it was only 7 and 17,respectively, in Irian Jaya and Kalimantan, which between them account for 50 per cent of the total land area.The population in urban areas increased by about 6 per cent per year during the 1980-1990 period. In thesame period the annual population growth in rural areas was only 0.8 per cent. Since the national populationgrowth is about 2 per cent, and since fertility rates in rural areas are higher than those in urban areas, it cansafely be assumed that more than two thirds of the urban population growth is caused by people migratingfrom rural to urban areas. This translates into a population movement of 2-2.5 million people per year.

During the years from 1961 to 1990 the absolute population growth was nearly identical in urban and rural areas- from 14 to 55 million in rural areas (300 per cent increase) and from 83 to 125 million in rural areas (50 per centincrease). Yet, this implied that the relative size of the urban population increased from 15 per cent to 31 per cent. Infact, the absolute population growth in urban areas in 1990 was estimated to be more than three times that in the ruralareas (3.3 and 1 million each year, respectively). This contrasts sharply with the 1960s when the absolute populationgrowth in urban areas was only half of that in the rural areas. With current growth rates, nearly 40 per cent of allIndonesians will be living in urban areas by the year 2000.

The urban housing problem is further aggravated by the fact that the largest population increase occurs in thelargest cities, i.e., those with a population of more than 500,000. By 1990, the three most populous cities were thecapital Jakarta (with more than 8 million inhabitants), Surabaya (2.5 million) and Bandung (2 million). The housingsituation in Jakarta and Bandung is discussed in detail in chapters III and IV.



1. Identifying the poor

After the completion of Repelita-I, poverty was still rampant in Indonesia. By 1976, 40 per cent of all urbanhouseholds were classified as belonging to the lowest income group, defined as those with a monthly income of lessthan US$ 24, while a further 30 per cent of urban households were classified as low-income, i.e., with incomes in therange US$ 24-71 (see table 6 ). During the following 15 years, economic growth reduced the number of poorsignificantly. This general improvement can be exemplified by the fact that the percentage of the total population withincomes below the official poverty line was reduced from 40 to l5 in the period from 1976 to 1990 (see table 7 ). Sincethe average household consists of about five people, the household poverty line is about Rp. l00,000 in urban areasand Rp. 70,000 in rural areas.

A major reason for the considerable economic improvement since 1976 was the increased participation of theprivate sector. Yet, 60 per cent of all Indonesians were still classified as belonging to the lower low- or lowest-incomegroups in 1992, i.e., they were members of households that had monthly incomes of less than US$ 228 (see table 8 ).



2. Housing stock

One of the main consequences of the low incomes is that a vast number of households are unable to securedecent housing. Housing conditions - in particular in rural areas and in kampungs (villages in urban areas) - do notcomply with acceptable technical or health standards.

The 1990 Census estimated that the total number of households in Indonesia was 39.7 million, of which 11.7million (29.5 per cent) lived in urban areas and 28.0 million (70.5 per cent) lived in rural areas (CBS, 1992c: 212). Yet,according to a national survey conducted in 1989, there were only 38.9 million housing units, of which 10.8 million (27.8per cent) were located in urban areas, and 28.1 million (72.2 per cent) were located in rural areas (see table 9 ). Themajority of houses in urban, as well as in rural areas, were owner-occupied, as is illustrated in table 10.

According to the same survey, the majority of households (21 million) lived in house units with floor areas inthe range 30-70 m2. Only about 15 per cent of the households lived in homes with floor areas of less than 30 m2, i.e.,those considered to be too small for the average household (see table 11 ).



3. Housing need

Based on the above figures, the housing shortage in 1990, defined as the difference between the number ofhouseholds and the number of dwellings, is estimated at about 770,000 units. If this shortage is to be eliminated withinthe next 20 years, 38,500 units have to be constructed annually. Furthermore, in order to supply the new entrants in thehousing market with a place to live, an additional 700,000 houses have to be built every year (to cater for a 1.98 percent annual population growth). Finally, if the housing stock is to be kept at an acceptable standard - i.e., if anestimated 3 per cent of the housing stock is rehabilitated/upgraded or replaced each year - an additional 1,050,000 unitsshould be provided annually. The total annual housing need in Indonesia in 1990 is thus estimated to about 1.8 millionunits.



4. Housing demand

An urban survey carried out by the Central Bureau of Statistic (CBS)revealed that about 45 per cent of therespondents were interested in obtaining Perum-Perumnas housing (CBS, 1990: 352-353). Yet, the economic situationof most of these respondents disqualified them from obtaining such housing. Table 12 provides details of housingpreferences according to expenditure class as revealed by the above mentioned survey. Sixty-one per cent of thehouse seekers are looking for a house of 36 m2 or smaller, only 7 per cent are looking for a house larger than 70 m2. Themost popular house types are the 36 m2 type (24 per cent), the 21 m2 type (17 per cent), and the 45 m2 type (16 per cent).

Yet, housing demand is not a function of income alone. People tend to choose housing units with access toproper infrastructure, and that are also near their place of work. Kampung rental houses are thus still the most popularhousing for the majority of the low- and lowest-incomes people. Furthermore, the majority of housing demand comesfrom the poorest groups. These groups cannot afford the houses supplied by the formal housing market. The newgovernment policy of building ..very simple houses" (RSS) and rental houses may alleviate some of the problems facedby the poorest groups.



5. Housing supply

Table 13 provides an outline of formal-sector housing production in urban areas since 1974. If these figures arecompared with the housing need, outlined above, it becomes clear that the role of the formal sector in housing supplyis rather insignificant. During Repelita-IV the formal sector produced only 13 per cent of the number of dwelling unitsneeded annually. The table further shows that the importance of Perum-Perumnas is decreasing. WhilePerum-Perumnas were responsible for 92 per cent of formal-sector housing production during Repelita-II, this sharehad dropped to only 6 per cent during Repelita-IV.

In rural areas, the public sector has been responsible for all formal-sector housing, through the rural housingimprovement programme (P2LDT) and the transmigration programme (see table 14 ). The sheer volume of dwellingunits produced under the transmigration programme during Repelita-IV, more than eight times that of BTN and twicethat of all private developers, is a good indicator of what can be done in the field of shelter delivery, if sufficientpolitical importance is given to it.

BKPN has estimated that the formal sector supplies only 15 per cent of all urban housing units in Indonesia. Inrural areas the figure is estimated to be only 1 per cent. With current figures for urban/rural distribution of the housingstock, this would indicate that the formal sector has been responsible for 4.9 per cent of total housing production inIndonesia. Yet, this estimate may be a bit on the high side. If the total number of houses constructed by formal-sectoractors up to 1989 (see table 2 ) is compared with the housing stock in 1989 (see table 8 ), the formal sector's share oftotal housing production adds up to only 2.3 per cent of the total housing stock. Herlianto (1993) has thus estimatedthe formal sector's share of urban housing production to be 11 per cent.

Table 15 outlines the contribution of various actors to housing supply in Indonesia in the period 1974-1991.Section II.A discusses the actors in the housing production process in more detail.

Traditional urban housing schemes and empty plots have proved to be unaffordable for the lowest-incomegroup. To reach this group, who mostly live in kampung areas, (4) the Government has initiated the KampungImprovement Programme (KIP). This was initiated (with loans from IBRD) in Jakarta in 1969, and was later extended toinclude 10 other big cities. A government decision to use a national fund (APBN) for kampung improvement resultedin the covering of hundreds of towns during Repelita-III and more than thousands of medium and small towns duringRepelita-V. Although KIP was not aimed at eradicating the housing shortage, but rather at improving the condition ofinfrastructure - i.e., roads, drainage, sewerage, and the provision of potable water and public toilets - the programmehas proved that infrastructural improvement of kampung areas encourages the people living there to develop theirhouses.

For people resident in a kampung, an official improvement programme that has the support of the Governmentimplies that the status of the kampung is legalized and thus eligible for government subsidies. The subsidies are US$25 per capita for IBRD-funded KIP and about US$ 15 per capita for the government-funded improvement programme,Urban Housing Pioneering Project (P2LPK), which was started during Repelita-III.

The main housing problem in rural areas is one of quality rather than quantity, i.e., the quality of availableinfrastructure - such as the provision of water - as well poor building materials and construction technologies. Themain government activity in rural areas, besides the transmigration programme, has thus been P2LDT. Tables 16 and 17outline the volume of units improved under the urban and rural development programmes. A comparison of the effectsof various public-sector programmes in Indonesia reveals that the urban as well as the rural improvement programmesare the ones that most efficiently have addressed the needs of the poorest groups.

The most significant human settlements programme in Indonesia today is the huge Integrated UrbanInfrastructure Development Programme (P3KT) which is supported with loans from IBRD, the Asian DevelopmentBank (ADB), and the United Nations Development Programme (UNDP), as well as other funding agencies. Thefoundation of this programme was laid during Repelita-IV, and it was widely implemented during Repelita-V. Theprogramme attempts to integrate all urban development programmes. Its main objective is that local governments,rather than the Central Government - with or without foreign loans - shall be responsible for the development of urbaninfrastructure. Through this decentralization of the provision of infrastructure more people may get access to improvedinfrastructure, thus enabling them to improve their living environment.


Chapter I. A changing shelter policyB. Reorganization of the housing sector

In its early years the objective of the national housing strategy was to address the shortage of housing and toprovide housing for low-income people. Yet, it soon became obvious that the Government was unable to meet theincreasing demand (let alone the target groups) through this strategy of public housing provision. The massivesubsidies that went into the essentially provider-based housing programmes of Repelita-II, Repelita-III and Repelita-IV far exceeded the capability of the BTN - which had been given the task of channelling subsidies to the housingsector - and thus the Government. During Repelita-IV and even more during Repelita-V, the emphasis wasincreasingly placed on private investments in the housing sector. The overall objectives of the housing sectorprogrammes, as stated in the latest GBHN - to be reached by the Year 2000 through the implementation of Repelita-VI(1994-1999) - can be summarized as follows (Bappenas, 1988):

The majority of the people in urban as well as rural areas shall be living in a healthy housing environment;

Housing and human settlement developments in urban areas shall keep pace with the urban populationincrease;

Housing and environment improvement support shall reach out to all rural villages;

Legal, institutional and financial systems - as well as the construction industry - shall be supportive of thehousing development programmes.

To realize these objectives the Government adopted an enabling shelter strategy, in line with therecommendations of the GSS. The philosophy of the new housing strategy in Repelita-V can be outlined as (Bappenas, 1989):

Housing provision is, in principle, the responsibility of people themselves. The role of the Government ismainly to create business and building opportunities and to push, mobilize and stimulate communityparticipation to enable the communities themselves to meet their housing needs.

The implementation of housing development is based on the principles of justice, equity, affordability,environmental awareness, and the ample consideration of the socio-cultural condition of the people.

Housing development is a multi-sectoral activity which should be supported by policies on spatial planning,land tenure, infrastructure, building technology, building-materials and construction industries, finance,institutional arrangements, human-resources development, legal regulations, and research and development.

Based on this broad philosophy a number of more specific interventions were identified:

Coordination of the activities of related agencies.

Involvement of all actors in the housing-delivery process, in the planning process as well as inimplementation.

Enhancing the role and capacity of local governments, cooperatives and non-governmental organizations(NGOs).

Support the participation of the private sector by enabling, mobilizing and developing its capabilities.

Establishment of coordinating agencies for rural housing development in central, provincial and municipalgovernments.

Develop communities' potential for mobilization of funds among themselves.

Control land price and land use (to attract investments in housing), introduce limitations on land ownership(to make more land available for public use), ensure the optimum use of empty lands (in particular toaccommodate large-scale housing development schemes on unused government land), support landacquisition for public use (to assist large-scale housing developments, rather than commercial andrecreational use), and simplify land registration and administration (to reduce building expenses). (5)

Develop a simplified house design, simplify the housing construction process and the procedure to obtainbuilding permits.

Support research on appropriate technologies and local building materials (to reduce the price of buildingmaterials and to ease the pressure on distribution and marketing networks - as well as to reduce the importleakages from the housing sector).

Establish regional building information centres to guide and disseminate information on appropriateconstruction technologies and building materials.

Establish a Youth Education Agency, to increase the awareness of better and healthier housing among theyouth.

Since the adoption of the GSS by the General Assembly of the United Nations, the Government of Indonesiahas taken a number of steps to facilitate housing supply. The most important changes to the legal and regulatoryframework may be summarized as follows:

The State Minister of Housing's decree No.0l/KPTS/1989 of 2 January 1989 on home-ownership credit fromBTN, to support broader housing and settlement programmes.

The State Minister of Housing's decree No.04/KPTS/1989 of 19 January 1989 on the use of home-ownershipcredit for empty plots, to enable people to build their houses according to their own taste and affordability.

The State Minister of Housing's decree No.07/KPTS/1989 of 27 July 1989, on the reorganization of the StateMinistry of Housing, in anticipation of increased urban housing and settlement development.

The President's Instruction No.5/1990 on rehabilitation of slum areas on government land-

The Head of the National Land Agency's decree No.4/1991 on "Land Consolidation" in order to facilitate thetransfer of land from private ownership for the public good.

The State Minister of Housing's decree No.54/PRT/1991 on RSSs. The RSS is defined as being simpler andcheaper than the "simple house" as it is built with lower-quality materials. It is built as a ready-to-move-inunit, but requires the dweller to complete some final work. The units are intended to be within the reach ofthe lowest-income people.

The National Housing Policy and Strategy, which was released in 1991 by the Office of the State Minister ofHousing, is one of the most important efforts by the Government in support of the enabling approach. In its firstchapter it states that housing is an important part of the macro-economics of the country. Besides a higher housingproduction target, this Strategy supports housing schemes that include private and community participation throughthe provision of "empty plots," "rental housing" and through urban and rural improvement programmes.

The Government Law on Housing and Settlements, No.4/1992 of 10 March 1992, released by the Office of theState Minister of Housing, is the main document on housing development in Indonesia. It confirms the aboveministerial decrees and states that housing is one of the main national priorities.


Chapter II. Housing supply at the national level

Following the recent changes in national shelter policies in Indonesia, the role of the public sector has beenredefined, from being the provider of housing for all (in theory, that is) to being a facilitator or enabler. As outlinedabove, Repelita-V clearly places the responsibility for housing provision on the people themselves. This chapter willtake a closer look at the actors operating in the shelter sector in Indonesia today. It will also briefly discuss thefinancial mechanisms operating in the housing sector in Indonesia. Figure 1 gives a brief overview of the main actorsfinancing housing.


Chapter II. Housing supply at the national levelA. Actors in the shelter-delivery process

The most important actors in the shelter-delivery process in Indonesia are the households themselves. Morethan 90 per cent of all housing units constructed in Indonesia each year are built without support fromPerum-Perumnas, BIN, or from private banks. The vast majority of low- and lowest-income group households receivevery little assistance, if any, from formal-sector housing institutions. This section takes a closer look at the roles andresponsibilities of the various actors in the shelter-delivery process in Indonesia, in the public as well the privateformal and informal sectors.


Chapter II. Housing supply at the national levelA. Actors in the shelter-delivery process1. Government and public-sector agencies

Following the past 20 years of government provision of housing in Indonesia, many different public bodies andagencies are currently in operation. Due to the recent policy changes, the roles and responsibilities of these agenciesare undergoing significant changes. The responsibility of the public-sector actors has primarily been to providehousing for households in the low-income category, and in particular to government employees or army staff who areunable to build houses on their own, due to their lack of savings. During Repelita-II, about 80 per cent of all unitsproduced by the public sector benefited households of the lower low-income group. This percentage, however, hassince declined, due to an increased demand for housing from the higher low- or moderate-income groups. Theincreased demand inflated the price of land, and in a situation with insufficient government subsidies, the lower low-and lowest-income groups found the publicly produced housing to be far too expensive.

Although in recent years some strategic plots (wide and near main streets) have been sold to individuals fromthe middle- or high-income groups as empty plots, most public-sector housing developments have targeted the low-and moderate-income groups. The middle- and high-income group have mainly been left to private-sector actors, whilethe lowest-income group is not reached at all through formal-sector housing supply. The only public sectordevelopments that can claim to have had a positive impact on the lowest-income group is the KIP and more recently,during Repelita-V, the building of RSSs and rental housing schemes.

The main government body in the human settlements sector is the State Ministry of Housing. The Ministry isresponsible for the coordination of housing development activities in Indonesia. The State Minister for Housing isalso the head of the BKPN, which was established to develop housing policies that enable the Government and theprivate sector to provide housing for low-income people. The main public-sector actors in the shelter-delivery process,however, are Perum-Perumnas and BTN. The following sections outlines the roles of each of these agencies in moredetail.



a. Perum-Perumnas

Perum-Perumnas was established as the operational agency responsible for undertaking housingdevelopments for the low-income groups. Following the recent housing policy changes the role of Perum-Perumnashas declined. From bearing the main responsibility for formal-sector housing provision during Repelita-II, theimportance of the formal private sector has outgrown the public sector. Table 2 shows that Perum-Perumnas built lessthan 18,000 dwelling units during the first two years of Repelita-V, thirteen times less than the number of units built bythe formal private sector.

The total number of dwelling units built by Perum-Perumnas, up to the end of 1991, is 216,556. Among these,57 per cent were core houses (of less than 27 m2), 39 per cent "simple/modest houses" and 4 per cent apartments orflats (see table 18 ). Most flats (56 per cent) were of 36 m2, 33 per cent were smaller than 36 m2 (18 or 21 m2) while only IIper cent were larger (42, 51 or 54 m2).



b. BTN

BTN was established to offer home-ownership loans to the low-income groups. Up to 1991, BTN had releasedsuch credits to 210,348 families through Perum-Perumnas and 515,618 families through other developers (CBS, 1992a).Following the recent housing policy changes, the role of BTN has changed dramatically. To alleviate the financialsqueeze on BTN, caused by a demand for loans that far exceeded BTN's financial resources, the Government decidedto diversify and privatize the housing finance system. The public and IBRD funds that had enabled BIN to offersubstantial subsidies on housing-loans dried up in the late 1980s. By July 1992 all housing subsidies had beenremoved, apart from those going to units of less than 21 m2 or to RSSs. These subsidies were, however, no longer themonopoly of BIN, but were channeled through a variety of private and regional development banks. Because of thisdevelopment, BIN was privatized in early 1991.

In 1990, BIN had a total of 6.5 million customers throughout the country, through its 25 branches and 17 cashoffices. It also deployed 30 mobile cash units, and posted assets totalling Rp. 2,935 billion (US$ 1,467 million) andprofits amounting to Rp. 24.6 billion (US$ 12.3 million).



c. Other public-sector actors

Besides the actors outlined above with direct responsibilities for housing provision, several other agencies andministries are involved in the multi-sectoral process of human settlements development. The most significant of theseare briefly outlined below.

The Ministry of Finance is responsible for the mobilization of funds for housing development and to channelthese through various financial institutions. It also has a role to encourage popular participation in thefunding of housing, and to increase the role of local governments in housing development.

The State Bank (Bank Indonesia) plays an important role in providing liquidity credit for banks and otherfinancial institutions engaged in shelter development.

The Ministry of Cooperatives is responsible for encouraging people to develop community cooperatives,i.e., cooperatives for housing development, building materials and building components, water treatment,waste disposal and potable water.

The Ministry of Home Affairs is responsible for encouraging local governments to create the atmosphere foran integrated development that includes housing. One of the most important development programmesstarted under the auspices of this Ministry during Repelita-IV was the huge P3KT programme, in whichhousing is a main component. The P3KT programme is supported with loans from IBRD, ADB, UNDP andother funding agencies. The objective of the programme is to enable local governments to develop the urbaninfrastructure, with or without foreign loans.

The National Land Agency (BPN) was established in 1990 to pursue the objectives on land policies outlinedin section I.B . Its main objective is to regulate landownership and land prices to make land for housingaccessible for the majority. BPN is also given the responsibility of acquiring large areas of land for housingdevelopments.

The Ministry of Industry is responsible for guidance and support to the building-materials and constructionindustries, to encourage them to use locally-available materials, in line with the broader aim to widenemployment opportunities.

The National Planning and Development Agency (Bappenas) is responsible for setting national goals andhousing development policies and objectives. It also sets programme priorities for housing developments inthe framework of the general national development policy and priorities.

The Ministry of Social Affairs is responsible for encouraging community participation in housingdevelopment. One of the more visible activities of the Ministry was initiated during Repelita-II, i.e., theNational Social Solidarity Day (HKSN), which encouraged many parties to take part in the development andimprovement of urban slums. The Ministry is also responsible for the construction of houses forgeographically isolated populations.

The State Ministry of Population and Living Environment is responsible for directing housing andsettlement developments to balance physical developments with demographic, economic, social and culturalaspects of development.

The Ministry of Transmigration is responsible for developing new rural communities and attracting peoplefrom the more densely populated regions (especially the Java and Bali). This is primarily done by acquiringand allocating ready-to-move-in houses and productive lands for cultivation. The transmigration programmewas intensified during Repelita-IV, when nearly 600,000 transmigration dwellings were constructed (seetable 14 ).

The Ministry of Women's Affairs is responsible for enhancing the role of women in housing development, todevelop housing that encourages a healthy family development.

The Ministry of Health is responsible for providing guidance on the public and environmental health

aspects of housing development programmes.



2. Actors in the private formal sector

Since Repelita-III, the Government has encouraged the private sector to take a more active part in housingdevelopments by offering the assistance of BTN and Papan Sejahtera. The importance of the private sector in shelterdelivery is best illustrated by the fact that the actual production of the formal private sector during Repelitas-II to IVwas more than three and a half times that of the public sector (see table 2 ).

The privatization of housing production has increased formal-sector housing production quite substantially.More people than ever before have thus gained access to formal-sector land and housing. Yet, one major problemarises out of these policies, the beneficiaries of these private formal-sector developments are mainly from theupper-low, moderate- and middle-income groups. The new land policies have led to substantial increases in the priceof land, and concentration of landownership, and have strengthened the lowest-income groups' dependence on theinformal housing sector. An increasing number of people build their homes individually or communally, withassistance from community-based organizations (CBOs), cooperatives and/ or NGOs. To alleviate some of the housingdeficit for the lowest-income groups, Repelita-V includes the planned development of 20,000 units of rental housing.



2. Actors in the private formal sectora. Private contractors

Although the private formal sector's share of the urban housing supply is still low, it plays an important role inthe provision of decent housing, in particular for the low-, moderate and high-income groups. During the 1974-1991period, private developers were responsible for more than 80 per cent (942,352 units) of all formal-sector housing (CBS,1992a).

During the first year of Repelita-II the Chairman of the Capital Investment Co-ordinating Body (BKPM) issueda decree (28/1974) to ensure that the private-sector actors were assisting the low-income, as well as the middle- andhigh-income groups. The decree stated that for each high-cost house constructed, the private developer should buildthree middle-cost and six low-cost houses.

In large and medium-sized cities (as well as in some small cities), the role of the private sector is mushrooming.Large-scale contractors in particular, have initiated many real-estate housing projects, including high-rise apartments,exclusive housing estates, "superblocks" with apartment housing (urban renewal), and new towns. Bumi SerpongDamai Estates in Jakarta is an example of such a "new town. " It has a total area of 6000 hectares. (6)

A major occurrence during the first year of Repelita-II was the establishment of REI. The objective of REI wasto encourage and strengthen its members, which were mostly involved in housing provision for the moderate, middle,and high income groups. Among the 907 developers that were members of REI in 1990, several small-scale contractorswere engaged in housing provision for the low-income groups. Table 19 indicates that most units constructed by REImembers in the 1974-1991 period were built for the low-income group (79 per cent). Only 18 and 3 per cent,respectively, were built for the moderate- and middle-income groups. In 1988 the members of REI declared that theywould stop the development of luxury and exclusive housing, i.e., housing for the middle- and high-income groups.

The large-scale contractors are the backbone of the private formal sector, partly because they are the only onesable to acquire large tracts of lands, and because of the relative growth of the moderate- and middle-incomes groups.These contractors are not only building houses and associated community centres, but also larger facilities such asdepartment stores, swimming pools, golf lawns, tennis courts or other recreation utilities. The large-scale contractorsare also developing office buildings, especially in the new town developments. Up to the end of 1991, large-scalecontractors had been responsible for the construction of 216,386 units (with the assistance BTN and private bankssuch as Papan Sejahtera).

Yet, although the large-scale contractors are considered the backbone of the private formal sector, the numberof housing units constructed through the activities of small-scale contractors up to 1991 is more than three times ashigh (725,966 units). The small-scale contractors operate in most cities in Indonesia. Their contribution is madepossible through the assistance of BTN, which covers most cities in Indonesia (mostly low-income people); the creditfacilities of Papan Sejahtera (middle-income people); and other private banks (for middle-income people). Mostsmall-scale contractors are organized in REI. There are, however, still many who operate on their own, especially thoseoperating on a very small scale on a small piece of land, or those operating in housing rehabilitations.



2. Actors in the private formal sectorb. Financial institutions

It is important to note that the activities of the private sector are made possible only through the assistance ofprivate banks and financial institutions offering housing loans. The most important such actor is Papan Sejahtera, afinancial institution established in 1980, with the objective of issuing housing credit to people who are not covered byBTN, i.e., people of the middle- and high-income brackets. The Bank of Indonesia owned one-third of the company'stotal assets, while the remaining two thirds were owned by three other private companies. In 1991 the Bank ofIndonesia reduced its share to 18 per cent, and the number of owners was increased to eight. To enhance and widenits capability to assist people to finance their housing Papan Sejahtera "went public" in 1992. Table 24 outlines theinterest rates charged by Papan Sejahtera on different types of credit. During the 1980-1991 period, Papan Sejahteraprovided Rp. 465 billion (7) for the construction of a total of 25, 004 housing units (P.T. Papan Sejahtera, 1992b).

In addition to Papan Sejahtera, many private banks offer credit schemes for housing, especially for the middle-and high-income brackets. Most of these banks offer home-ownership loans or housing construction loans.Furthermore, banks offer "professional" credit schemes, catering for professional categories such as lawyers, medicaldoctors and psychologists. The interest rates offered and requirements imposed by these banks vary considerably, sono specific figures are included here.



3. Informal-sector actors

As was stressed above, the bulk of housing production in Indonesia occurs through informal-sector activities,by individuals alone or through the cooperation of NGOs, CBOs or cooperatives. At least 85 per cent of all urbanhousing, possibly as much as 89 per cent, is the result of the activities of the informal sector. In rural areas the informalsector plays an even more dominant role, being responsible for 99 per cent of all housing production.



3. Informal-sector actorsa. NGOs

Due to the limited funds available to most NGOs, the impact of their individual activities is not normally verysignificant. Yet, due to the number of NGOs their collective contribution makes an impact. Several NGOs have, withgreat success, built thousands of houses. An accurate figure on the total volume of housing units constructed byNGOs is not readily available. This is partly due to their informality. Herlianto (1993) has, however, estimated that theNGO contribution amounts to about 20,000 units in the 1974-1991 period, i.e., about a tenth of the total production byPerum-Perumnas. This volume is not very staggering, yet the focus on the lowest-income group makes theircontribution important.

NGOs operate at the grassroots level, get their money from donations, religious agencies, government grants orfrom foreign aid. Due to this particular nature of funding, interest is normally not added to the loans offered by NGOs.Loans are normally repaid in a relatively easy way (compared with what is normal in the formal sector), sometimes apart of the loan is even given as a grant to the loanee.

Although several NGOs operate quite successfully in Indonesia (all big cities in Indonesia have their ownNGOs that serve the poor in one way or another) there is only space to mention a selected few here:

Soewono Blong, an informal leader of the city Mojokerto (near Surabaya) in East Java, has built houses formore than 2000 families since 1966. He received the support of the local government to build low-costhouses for beggars and others of the poorest sections of the society on apiece of land of 22 hectares. Bydoing this he was awarded "Kalpataru Award" (award for living environment) by the Central Government.

Since 1965 the Sugyapranata Social Foundation (YSS) in Semarang city has built 1700 houses for almost 9000poor people in different locations, on a total area of 20 hectares.

Since 1980 Yayasan Panca Bhakti has built thousands of houses for poor people in Jakarta.



3. Informal-sector actorsb. CBOs

In traditional communities, especially in rural areas, CBOs are part of the daily community life. The most popularmechanisms used in the shelter-delivery process by CBOs in Indonesia are mutual self-help (gotong royong) and thecollective lottery (arisan).

Mutual self-help is a mechanism where all people of a local community participate in the housing constructionprocess if any member of the community builds a house. Participation typically occurs in terms of labour or in kind(building materials etc.). Women frequently participate through the preparation of lunch and snacks for the workers.Mutual self-help is most commonly used in the rural areas where 99 per cent of all housing units are built by thedwellers themselves or communally through this mechanism. Mutual self-help is practised on a more limited scale inurban areas, most commonly in the kampung areas where the community bond is still strong. The fact that thekampung areas serve as a transitional area for most rural to urban migrants partially explain why this traditionalmechanism of housing delivery is more common in kampungs than in other urban areas.

The collective housing lottery (arisan) seems rather businesslike compared with the mutual self-helpmechanism outlined above. Yet it functions in a similar manner. The typical operation of this mechanism is that, forexample, 10 individuals who each plan to build a house come together and make a design of atypical house. Allmembers then agree to contribute 10 per cent of the cost to build the first house. A lottery is held and the lucky winnerreceives the house for keep. After the completion of the first house, a second house is constructed (either immediatelyor after a short period), a new lottery is held, and so on, until all members have received a house.

One problem with the above kinds of mutual self-help is that they are spontaneous, individual and respond tolocal needs, and are not yet mobilized as regional or national mechanisms. Public support to such initiatives (possiblyas subsidies) could encourage an even broader use of this type of mechanisms.

To overcome the above shortfalls the Office of the State Minister of Housing, with the assistance of UNDP,undertook a study on how to organize CBOs better in housing development (1991-1993). The CBLCH project wasinitiated to explore and develop a working mechanism to mobilize community efforts to improve housing conditions, aswell as the environment and social and economic life of the community. The objective of the project was to assistpeople from evicted slum areas to gain access to Perum-Perumnas' empty plots and credit facilities. This was done byencouraging the communities to form CBOs. The project concentrated on target groups that shared at least onecommon characteristic, i.e., that they were factory workers, or an, association of becak (pedicab) drivers, or streethawkers. The project concentrated its efforts on two areas; i.e., the Cengkareng Perumnas Empty Plots project inJakarta and the Rancaekek Perumnas Empty Plots project in Bandung.

The CBLCH project offered three types of credit with the objective of developing a community-based financingmechanism; i.e., empty plot ownership credit (KPKSB), construction and improvement credit (KK), and economicactivity credit (KUK). (8) This "bottom-up" approach addressed an area of housing finance that so far had beenneglected. It was very much in line with the stated objective of linking informal-sector finance mechanisms with theformal banking system.



3. Informal-sector actorsc. Cooperatives

In the past, housing cooperatives have only operated sporadically and on a very limited scale, as adevelopment of the traditional gotong royong (mutual self-help) mechanism. Yet, recent government support haspopularized wider use of cooperatives. This support is formalized through a decree, on "the provision of housingthrough cooperatives, " by the Minister of Co-operatives and the State Minister of Housing (1987), and the StateMinister for Housing's Decision on "guidelines for housing and settlements provision with the facility of BTN forco-operatives" (1987). The cooperative movement in general is supported by the Basic Law of 1945 (UUD45, chapter33) while housing cooperatives are supported specifically in Law No.132/1967. The most important categories ofhousing cooperatives are those for workers, students and employees, as well as the rural unit cooperatives (KUD) thathave gained increasing popularity over the last few years.

Workers' cooperatives have been established in private companies, factories, hospitals, schools etc. They arenormally based on the direct support of the "parent" company, which thereby assists its workers to gain access tohousing. The support may be as pre-payment of the downpayment, direct loans or even a subsidy on the banks'interest rate.

In five state universities - in Aceh, Medan, Sala, Malang and Ambon cities - construction of dormitories forstudents and university employees has been made possible through "Dormitory Owned Credit" from BTN. Thedormitories were built by KOPINDO, the Indonesian Student Cooperatives, and they are currently managed by studentand employee cooperatives. The main problem with this is that they are led by young and unexperienced persons. Thishas led to slow repayment of the BTN loans.



3. Informal-sector actorsd. Individuals/households

As was mentioned above, at least 85 per cent of urban and 99 per cent of rural housing are built byindividuals/households with assistance of NGOs, CBOs or cooperatives, or, most commonly, by themselves. The mainreason for this expulsion from the formal housing market is economics: the cost of land and housing credit isincreasing faster than incomes. During the 1978-1988 decade the incomes of the first and second grades of civilservants (classified as belonging to the lower-low income group) increased 1.8 times, while the price of housingincreased by a factor of 2.8. Furthermore, since annual inflation is higher than the growth of incomes, the portion ofincomes available for housing is decreasing as well. The net result has been a serious erosion of affordability.

Yet, there are several other reasons why people prefer construction through self-help efforts. These include thepossibility to use cheaper materials, shorter construction period, personalized dwellings, lowering of costs and, mostimportantly, the possibility to build incrementally, as funds allow, and/or need demands. These options are normallynot available with formal-sector housing schemes which tend to build large volumes of uniform housing units. Themain reason for the importance of the informal sector, however, is the sheer volume of annual housing demand. Thehigh rate of urbanization has created a housing shortage that cannot be addressed by the formal sector alone.

The main problem with informal-sector housing activities, however, is the illegality of tenure and the lack ofcommunity infrastructure, which frequently leads to rather unhealthy environmental conditions. If these communitieshad security of tenure, most of them would have been able (and willing) to invest in the land, and thereby improvetheir housing and environmental conditions. If security of tenure is obtained, people can build at their own pace whenand as they prefer. Security of tenure is also one of the main issues that has to be resolved before low-incomecommunities can be reached by the formal banking or housing-credit system.


Chapter II. Housing supply at the national levelB. Housing finance

Housing finance is in extremely short supply in Indonesia. This is due to inflation, high land prices and the lackof low-interest credit for housing. The shortage of credit is felt at every stage in housing development, but it isparticularly acute for long-term low-interest mortgage credit.

Various mechanisms for the pooling of funds (some of which are outlined below) have, however, enabled theGovernment and private developers to develop their housing strategies. Funds have been invested in various projectsand programmes, such as those for mass housing, kampung improvement, and urban renewal, as well as thedevelopment of new towns.



1. Household savings for housing

In the past, most Indonesians kept their assets as cash money, jewellery or gold. The arrival of consumerism,however, reduced people's willingness to save. The habit of buying consumer goods, popularized through massiveadvertisement campaigns in the mass media, has absorbed most of people's savings. The combination of thetraditional approach and consumerism has, in the past, actively discouraged people from developing a saving habit forhousing purposes. To correct this trend, the Government has, during the last few years, successfully endorsed ahousing saving habit. Most people are now aware of the importance of savings for housing purposes, and of thebetter long-term profitability of investments in housing rather than in consumer goods. The housing projects havebecome an active partner in the process of educating people on the importance of saving their money. The volume ofhousehold savings for housing purposes has thus increased considerably over the last few years. This emergingsavings habit enables BTN and private banks to mobilize household savings for housing developments. It alsoenables more people to afford their own house.

The Sugyapranata Social Foundation housing project for the poorest group, has shown that even the poorestgroups can be persuaded to save for housing. Although most of the capital in this project is donated, there is aconsiderable potential for using the savings of the participants for the establishment of a revolving fund, thus beingmobilized for further developments.



1. Household savings for housinga. BTN savings

Because of the Government's appeal for a national saving awareness, the Government through BTN hassuccessfully collected savings from many sources. Repelita-V envisages that one third of all home ownership fundingwill originate from household savings (see table 20 ).

BTN offers several different saving instruments. These are outlined below:

The National Savings scheme (Tabanas) is the most popular savings system developed by BTN. It offersannual interest of 18 per cent. This system is very popular, especially among high-school students, and it isestimated that it will collect 10 per cent of BTN's total budget for home-ownership funding during Repelita-V(see table 20 ). The Tabanas system has even encouraged private banks to start similar saving systems.

The downpayment savings scheme (TUM/Pradana) encourages people to save, whether they need to buy ahouse or not. It aims to discipline would-be house buyers to start a regular saving habit, of up to one third oftheir monthly income, long before they actually intend to buy a house. The TUM/Pradana scheme requires acandidate to have an experience of at least one year of faithful and regular saving before he/she is eligible forhome-ownership credit. Once a candidate has fulfilled this requirement he/she is eligible for a loan withinterest of only 12 per cent per annum. Repelita-V estimates that the TUM/Pradana system will generate 8per cent of BTN's total budget for home ownership funding (see table 20 ).

The insured housing savings system is a new savings mechanism, and is a modified version of theTUM/Pradana scheme. Prospective clients are expected, each month, to save between one third and onefourth of their monthly income. If they can save regularly each month for at least one year they becomeeligible to apply for house-ownership credit (KPR-Griya) or serviced-plots-ownership credits (KPKSB).

The housing improvement savings system is aimed at people that in the future may require access tohousing-improvement credit. Members of this savings scheme are given priority access to the KUPARAcredit scheme.

The worker's housing savings are collectively collected by companies for the benefit of their workers, andfaithful savers are eligible to apply for house-ownership credit (KPR-Griya).

The last major savings system, the deposits scheme, will generate nearly 5 per cent of BTN's total housingbudget during Repelita-V (see table 20 ).



2. Housing-credit systems

To connect the household saving system with the demand for housing credit, various credit schemes areoffered by private banks. Table 21 shows that the interest rate charged (by BTN) on housing credit has increasedconsiderably over the last 1.5 years, both in relative and real terms. While it was heavily subsidized in 1979, to lessthan a fourth of the inflation rate, the rate was nearly five times higher than inflation in 1992. The average marketinterest rate for housing loans since 1990 has fluctuated in the range of 23 to 25 per cent. Table 22 outlines thefluctuations of the average annual inflation rate and the exchange rate between the Rupiah and the United Statesdollar.



2. Housing-credit systemsa. BTN credit schemes

Table 23 outlines the characteristics, target groups and regulations of various credit schemes offered by BTN.It reveals that BTN now offers credit to a wide spectrum of target groups. It reaches those with monthly incomesabove Rp. l,250,000 (middle- and high-income groups) and those with monthly incomes below Rp. 150,000 (lower low-and possibly lowest-income groups). This widening of its target groups is in line with the GSS, i.e., that the focusshould not be limited to the poor, but instead include all income categories. Yet, BTN continues to favour the low- andlowest-income groups, by offering these groups lower rates of interest. This policy is made possible by governmentsubsidies.



2. Housing-credit systemsb. P. T. Papan Sejahtera credit schemes

Table 24 outlines the characteristics, target groups and regulations on the four credit schemes offered by PapanSejahtera. The minimum interest rate of Papan Sejahtera is 22 per cent. This rate, which applies to the upper low- andmoderate-income groups compare quite favourably with the rates offered by BTN. The median interest rate offered byBTN to the moderate- and middle-income groups is 23 per cent.



3. Incentives for investment in housing

Private contractors concentrate on the construction of high-cost housing, which is considered more profitable.Low-cost housing is considered less profitable because of the ever-increasing price for land, the low per unit profitmargins, and the fact that the relative cost of infrastructure is higher in low-cost housing. To bypass this obstacle andto increase investments in housing developments, the Government has offered several incentives to contractorswilling to serve the low-income group. Some of these incentives are outlined below.

Establishment of BTN and Papan Sejahtera. This enabled private contractors to let the banks carry thefinancial risks of housing investment.

Liquidity credit from the State Bank to BTN and Papan Sejahtera. This enables contractors to borrow moneyfrom the two banks at below-market interest rates. Tax relief given to developers who build housing for thelow-income group.

Provision of infrastructure. Access roads, potable water, electricity and telephone services enable thedevelopers to market their product easily.

Easy access to cheap land. This encourages developers to invest in housing developments-

Formulation of the housing law and regulations on building permits, land acquisitions, location permits etc.



4. Subsidies in the housing sector

The subsidies given to the housing sector have enabled BTN and Papan Sejahtera to lower their interest rateson housing credit. In the period 1976-1990 all credit schemes offered by BTN were subsidized by the Government. Thesubsidy amounted to 100 per cent of the difference between the market rate and the interests offered by BTN (see table21 ). The Government also subsidized 20 per cent of the difference between market rates and housing credit rates ofPapan Sejahtera and private banks. The largest subsidy was given to units below 21 m2 (intended for thelowest-income people), and the subsidy decreased for bigger units. The sheer volume of subsidies soon became animpossible burden for the Government, and the Government thus, in 1990, decided to abolish the housing subsidies,for all but the smallest housing units (RSSs, below 21 m2). Since then, all other mortgage rates have followed the marketrate.

The present subsidy given to the RSSs - of 21 m2 on a plot of 54 m2 - enables Perum-Perumnas to offer this typeof units for Rp. 3,550,000. With a 10 per cent down-payment, the mortgage can normally be repaid over a period of 5 to20 years.



5. Affordability

There is a considerable surplus of housing units for moderate- and middle-income groups in Indonesia. At leastit seems to be so, judging from the fierce competition for customers raging between the main private-sector developers(as well as BTN). Those that can afford to enter the formal-sector housing market can choose a house suited to theirtaste. Yet, the main reason for this situation is one of affordability. This apparent surplus of formal-sector moderate-and middle-income housing, exists side by side with an acute general housing shortage. For most Indonesians,housing has become less affordable over the last 15 years.

The main unresolved problem in shelter delivery in Indonesia is the problem of the low- and lowest-incomegroups. These groups require subsidies to be able to participate in the formal housing market. The problem isparticularly grave for the lowest-income group. Their income-generating potential is too limited to enable them to beeligible for assistance from the banking system. Their only housing option is the illegal squatter settlements, wherethey live a rather fragile existence, in constant fear of being evicted by the authorities.

Table 25 outlines the average unit costs for various categories of formal-sector dwellings. The table revealshow the average prices of units produced by Perum-Perumnas undercuts those produced by private developers. Itfurther reveals how neither Perum-Perumnas nor private developers can provide housing for the lowest-income group.The "low-cost" housing units built by Perum-Perumnas are still beyond the reach of the poorest group. In theory,RSSs should be affordable for the poorest group, at least those with monthly incomes between Rp. 85,000-l00,000. Inpractice, however, this is not the case. To be eligible for an RSS, a client is required to have a regular monthly incomeand to raise a downpayment. Thus, people with irregular and low incomes earned from informal-sector activities -which is the main characteristic of people classified as belonging to the lowest income group - do not qualify for thehousing units that were intended for them.

To alleviate the problem for the lowest-income group, the Government is initiating a rental housing scheme,with daily rentals as low as Rp. 750 or monthly rentals of Rp. 22,500. This type of housing should (at least in theory) beaffordable for people with monthly incomes of Rp. 67,500. Yet, the provision requiring the poorest groups to pay onethird of their incomes in rent may seem overtly optimistic. Furthermore, the character of the formal-sector rentalhouses, i.e., their peripheral location and the fact that they are flats (which is alien to their way of life), may alsodiscourage the lowest-income groups. The Government has thus decided to provide subsidies to individuals inkampung areas so that they can develop their houses to rent out rooms, thus making cheap dwellings available for thelowest income group.


Chapter III. Jakarta

Jakarta, the capital of Indonesia, is by far the largest city in the country, with a total population of 8.2 million in1991 (see table 26 ). Jakarta is governed by the Governor of the Capital Special Area (DKI) and covers an area of 65,000hectares (including the islands in the bay of Jakarta). It is subdivided into five municipalities (kotamadya), namely theCentral, South, East, North, and West, which again are subdivided into 30 districts (kecamatan), and 260sub-districts/villages (kelurahan). Jakarta as an urban agglomeration, however, is not limited to its official borders. Alarge part of the people working in Jakarta live in the towns of Bogor (south), Tangerang (west), and Bekasi (east).These surrounding areas go under the name Botabek (Bogor-Tangerang-Bekasi). Jakarta and the surrounding areas ofBotabek are known as the Jabotabek (Jakarta-Bogor-Tangerang-Bekasi) agglomeration.

To cope with the housing situation in the capital city, a Housing Affairs Office was established in 1948, underthe Ministry of Social Affairs. The Office was transferred to the Jakarta Provincial Office in 1958, and was reorganizedto form the Jakarta Housing Office in 1967.

Below follows a brief outline of the main policies/programmes that may contribute to an increase in housingactivities/supply in Jakarta:

Inter-sectoral cross-subsidies are used by the governor to mobilize all sectors of society in housingdevelopment, improvement and rehabilitation-

The main new housing developments are based on the development of mass housing, targeting the low- andmoderate-income groups, and the upgrading of dense and deteriorated slums areas (with flats).

Jakarta, the capital of Indonesia, is by far the largest city in the country, with a total population of 8.2 million in1991 (see table 26 ). Jakarta is governed by the Governor of the Capital Special Area (DKI) and covers an area of 65,000hectares (including the islands in the bay of Jakarta). It is sub-divided into five municipalities (kotamadya), namely theCentral, South, East, North, and West, which again are subdivided into 30 districts (kecamatan), and 260sub-districts/villages (kelurahan).

Jakarta as an urban agglomeration, however, is not limited to its official borders. A large part of the peopleworking in Jakarta live in the towns of Bogor (south), Tangerang (west), and Bekasi (east). These surrounding areasgo under the name Botabek (Bogor-Tangerang-Bekasi). Jakarta and the surrounding areas of Botabek are known as the Jabotabek (Jakarta-Bogor-Tangerang-Bekasi) agglomeration. To cope with the housing situation in the capital city, aHousing Affairs Office was established in 1948, under the Ministry of Social Affairs. The Office was transferred to theJakarta Provincial Office in 1958, and was reorganized to form the Jakarta Housing Office in 1967.

Below follows a brief outline of the main policies/programmes that may contribute to an increase in housingactivities/supply in Jakarta:

Inter-sectoral cross-subsidies are used by the governor to mobilize all sectors of society in housingdevelopment, improvement and rehabilitation.

The main new housing developments are based on the development of mass housing, targeting the low- andmoderate-income groups, and the upgrading of dense and deteriorated slums areas (with flats).

The KIP will be intensified by the mobilization of external and internal sources.

Efficient use of green areas for low-cost housing, and regulation of land prices to ensure affordability of thelow-income groups.

The development of land earmarked for housing for the low-income groups will be regulated throughbuilding permits, taxes and development assistance.

The campaign to popularize rental housing and high-rise flats will be intensified.

To support the development of flats the Government adopted a law (No.5/ 1990) on flat housing. The lawoutlines the responsibility of local governments to carry out mass developments of low-cost flats on Government landthrough cross-subsidy mechanisms. As a follow-up to the adoption of this law, the DKI Provincial government, in1990, released a decree (No.540/1990) on the acquisition of land of more than 5,000 m2. Such areas require a "Location

Principle Approval " (SP3L) and have to set aside 20 per cent of the built-up land for the construction of low-cost flats,for the benefit of low-income people. The decree was reaffirmed by a "sanction decree" (No.640/1992) in 1992.


Chapter III. JakartaA. Scope and scale of the shelter problem

The annual population growth rate in Jakarta is almost 6 per cent. It is estimated that the population will exceed10 million by 1995, and 14 million in the year 2000. This rapid population growth has by far outpaced the provision ofinfrastructure. Rapid economic growth during the last few decades has further aggravated the situation; the number ofmotor vehicles in Jakarta increases by 15 per cent each year, while the volume of roads only increases by 4 per cent.

Jakarta's urban environment is thus characterized by congestion and a rapid deterioration of the urbanenvironment. The in-migration of rural poor, with poor education and skills, has created flourishing slums and squatterareas around the city. It is estimated that more than 60 per cent of the built-up area of Jakarta is kampungs. The densekampung areas in the city function as a transition place for the rural immigrants to adapt the new and strange urbanmodern environment. Two thirds of the population now lives in these areas. Consequently, half of all kampungs inJakarta have deteriorated into slums and squatter settlements - characterized by the lack of potable water, poorsanitation and sewerage systems, narrow alleys, undisposed garbage, etc. - and with population densities exceeding300 per hectare. In some kampung areas, the density exceeds 1000 per hectare. Yet, because the kampungs arecharacterized as low-income settlements, the very poor often have to find even cheaper housing options. They have tosquat in every place possible such as at riverbanks, along the railroad, under bridges, in public parks, or inundeveloped lands.

Besides being poorly served by infrastructure, the employment opportunities in the kampung areas are alsorestricted. Most of the occupants are involved in the informal-sector as vendors, hawkers, and becak drivers. SinceJakarta's government actively enforces a law to regulate the activities of the informal sector - a law contrary to the verynature of the informal sector - investments in informal-sector activities are rather risky. Yet, a survey conducted in 1985estimated that 65 per cent of all employment in Jakarta is in the informal sector (Ustianto, 1990).

The last 20 years have seen a process by which the gap between the rich and the poor has widened, while morepeople encounter social injustice, leading to alienation, apathy and even hostility.



1. Housing stock

In 1990 there was a total of 1,318,628 dwelling units in Jakarta, of which 40.6 per cent were classified aspermanent, 35.5 per cent as semi-permanent, and 23.9 per cent (314,655 units) as non-permanent dwellings (DKI,1991a). The vast majority of the units, 80 per cent, were privately owned (see table 27 ).



2. Housing needs

The housing need in Jakarta is alarming, and the population growth far exceeds the development of newhousing units. Table 28 provides an overview of the housing needs in 1990. The housing shortage, i.e., the differencebetween housing stock and housing need, was 131,550 units. Yet, if it is assumed that the 314,655 non-permanentdwellings are of poor quality and needs to be replaced, a total of 446,205 units needs to be constructed to cover thepresent need. Furthermore, the need outlined in table 28 suggests that the 1.7 million households require only 1.5million dwelling units, an average of 1.2 households per unit. The conclusion of the above is that, if each household inJakarta should have its own permanent or semi-permanent dwelling unit, the total housing shortage is 736,243 units(being the difference between 1,003,973 permanent or semi-permanent units and the number of households). Thisimplies that only 58 per cent of the housing needs in Jakarta were met in 1990.


Chapter III. JakartaB. Actors and housing supply

Table 29 presents an overview of total formal-sector housing production in Jakarta up to 1992. It reveals thatonly 3 per cent of the housing stock in Jakarta is produced by formal-sector actors. Even if the stronger formal sectorinvolvement in the Botabek region is taken into account, the formal-sector production in the Jabotabek area is farbelow the national urban average of 11-15 per cent. The vast majority of units are thus produced by informal-sectoractors. Yet, this being said: the contribution of KIP to shelter delivery in Jakarta should not be underestimated (seesection III.B.1.c .

The most popular formal-sector dwelling has been the core house (58 per cent), built for the low-income groups.It is worth noting that 21 per cent of the units built are flats. Table 30 summarizes formal-sector housing production inthe Botabek region. The formal sector has built more than twice as many units in the Botabek area as it has in Jakarta.One major reason for this is the problem of finding available land within Jakarta itself.

As in Indonesia at large, the main housing developers in Jakarta are the households themselves. According tothe Jakarta 2005 Master Plan (DKI, 1987) the communities, either by the households themselves or through NGOs, areresponsible for 75 per cent of all housing construction. Table 31 shows that DKI expects informal-sector actors, i.e.,individuals or communities, to supply more than half of the expected housing demand of the 1990-1995 period. REI,PD-SJ (the housing company of DKI) and Perum-Perumnas are expected to construct the remainder. (9)



1. Public-sector actors

As was noted above, both central government and local government agencies are involved in housingdevelopments in Jakarta. The activities of the main public sector actors are outlined below.



1. Public-sector actorsa. Perum-Perumnas

According to table 31, Perum-Perumnas' share of the expected housing production in Jakarta during the1990-1995 period is only 14 per cent. Yet, the fact that Perum-Perumnas is more involved in the Botabek area than inJakarta itself should be taken into account (see tables 29 and 30 ). A substantial part of the units built byPerum-Perumnas in Jakarta over the last 15 years are flats. This is due to the acute shortage of land within Jakarta city.Low-rise houses can only be built at the outskirts of the city, where land prices are still relatively low. The main recenthousing developments in Jakarta city are the Klender housing project and the Kebon Kacang, Tanah Abang and theKemayoran flat housing projects (see table 32 ). The Klender project is the only project inside Jakarta city wherePerum-Perumnas has built low-rise housing. The Kemayoran housing project is the most recent high-rise publichousing development in Jakarta. It is constructed on what was formerly Kemayoran airfield, and consists of walk-upflats of four to eight storeys. The plan is to build 7000 units of flat housing in 130 blocks. During the first phase of theproject a total of 1472 units in five-storey flats were constructed.

Within the larger Jabotabek metropolitan area, Perum-Perumnas have built substantial numbers of low-risehouses, in areas where the land price is still relatively low. The main housing projects in the Botabek area are theKarawaci and Kelapa Dua housing complexes in the Tangerang region; the Depok, Cimanggis and Gunung Putrihousing complexes in the Bogor region; and the Rawa Tembaga, Setia Mekar and Rawalumbu housing complexes inthe Bekasi region. Table 30 outlines the total number of units constructed by Perum-Perumnas in the Botabek area upto 1992.



1. Public-sector actorsb. Jakarta housing enterprises

The Government of Jakarta has established its own housing enterprises, i.e., PD-SJ, BPL Pluit, Yayasan PuloMas and Bappem KIP. The main objective of the first three agencies is to build rental walk-up flats. The main suchprojects are outlined in table 33 . The main target group is the low-income group, and priority is given to the first andsecond categories of government officials, i.e., mostly of the lower-low income group. The Local Government's Bank (BPD) provides funding.



1. Public-sector actorsc. Bappem KIP-MHT

The well-known Kampung Improvement Programme was initiated in Jakarta during Repelita-I and was knownas KIP-MHT (Kampung Improvement Programme - Muhammad Husni Thamrin). At first it was financed primarilythrough an IBRD loan, but later phases were financed out of the local budget and carried out by a DevelopmentExecution Board known as Bappem. The activities of Bappem have reached almost all of the kampung areas in the city,covering an area of 1400 hectares with a population of 3.9 million people.

The objective of KIP is not focused on the building or improvement of kampung houses as such, but rather toconstruct or improve the infrastructure of the kampung areas. Yet, the Programme has encouraged people to improveand build their houses. The project has mostly benefited the low- and lowest-income segments of the urbanpopulation.



1. Public-sector actorsd. Central-government agencies

In addition to the agencies listed above most central government bodies and agencies have their offices inJakarta. Most central-government agencies provide housing for at least part of their employees. This is made possiblethrough cooperation with BTN, employees cooperatives or by the initiative of the agencies themselves. Thesedevelopments are facilitated by the fact that it has proved easier for government agencies to acquire land.



2. Private-sector actors

Because Jakarta is the capital of Indonesia and that, according to public opinion, 60 per cent of the moneycirculating in the national economy can be found there, it is not surprising that 435 of the 907 REI members can befound in Jakarta. table 29 shows that the REI members so far have been responsible for 59 per cent of the housingdevelopments in Jakarta, producing nearly twice as many units as Perum-Perumnas. In the areas surrounding Jakarta,however, Perum-Perumnas has been a more significant actor (see table 30 ). The members of REI have beenresponsible for 46 per cent of all formal-sector housing developments in the Jabotabek region, second only toPerum-Perumnas with 51 per cent.

Some of the largest contractors in Indonesia are located in Jakarta, and their main target group has so far beenthe middle- and high-income earners. The contractors have been engaged in the building of exclusive real-estate areas,such as Pondok Indah; large-scale estates, such as Kelapa Gading and Bintaro; development of new towns, such asBumi Serpong Damai which covers 6,000 hectares of land in the southern parts of Jakarta; the development ofself-sufficient housing neighbourhoods, by providing sport centres (including swimming pools), department storesand other recreation facilities; and the construction of luxury apartments. About 14 such luxury apartment complexeshave been constructed, with a total of 1,227 units in the range between 70 and 260 m2. The funds for thesedevelopments have come from Papan Sejahtera or from private banks.

In addition to the large-scale contractors, there are hundreds of small-scale contractors operating in Jakarta.They have produced complexes ranging from several to hundreds of housing units, financed through thehouse-ownership credit of BTN (KPR-Griya, for units of 21-70 m2), Papan Sejahtera (for units of 45-200 m2), otherprivate banks or by individuals.

Table 34 outlines the volume of housing constructed by members of REI in the Jabotabek region up to 1990. Itshows that BTN has provided the funds for more than two thirds of such housing developments. The vast majority ofREI developments have been low-rise buildings. The number of flats and rental units constructed by REI is still verylow.

As in the public sector, it is quite common for private-sector business enterprises to provide housing for theiremployees. The number of units provided in this manner is, however, not readily available.



3. Other actors

The vast majority of housing development in Jakarta is made by the households themselves. Table 31 showsthat households and communities are expected to construct more than half of all new housing units in Jakarta in the1990-1995 period. The new credit schemes offered by the BTN, such as house-improvement and house-developmentcredits (KSG) have made it easier for individuals to finance the construction of their own houses, according to theirown taste and capability.

The most important single factor to the improvement of housing in Jakarta, however, may be KIP. Through theimprovement of infrastructure in the kampung areas the inhabitants have been encouraged, and enabled, to improvetheir deteriorated houses, either through improvement, extension or rehabilitation.

So far, NGOs have made no serious impact on housing supply in Jakarta. Yet, due to many new types ofavailable housing-finance schemes, such as improvement credit, construction credit and serviced-plot-ownershipcredit schemes, it is possible that more NGOs will venture into housing production for the poor. Most NGOs havebeen operating at a rather small scale in slum-improvement and -upgrading schemes, focusing on the homeless. SomeNGOs, however, like Yayasan Panda Bhakti, have built thousands of houses in Jakarta and its surrounding cities.

The importance of CBOs in housing production has also been rather insignificant, partly due to theheterogeneous nature of most low-income settlements. The role of cooperatives, however, has been more significant.Their formation is encouraged by the Government in government agencies, business enterprises, foundations(schools, hospitals etc.), factories etc. Most cooperatives are not housing cooperatives per se, but are aimed at thedevelopment of the economic capability of their members in general. Some cooperatives, however, have latelyexpanded their operations to include housing.

The employee/worker cooperatives are encouraged to collect money from their members for housingdown-payment savings (like the TUM/ Pradana). The co-operatives may support housing developments by acquiringlands. The actual housing construction might then be commenced later with BTN credit, like the KPKSB and KK creditschemes.

One cooperative deserves specific mention, i.e. the Cooperative of Residents of Pejaringan Apartment House(Kopersup), in the Pejaringan ex-fire disaster slum community. It has a total of 156 households as members. Thecooperative is assisted by the CBLCH project (10) and has been more able to get assistance from a variety of housingcredit schemes, such as KPKSB, KPR, KK, for the construction of their houses, and economic activity credit (KUK).

The CBLCH effort is very positive, as it tries to bridge the gap between powerless CBOs and cooperatives andthe formal-sector housing-credit and banking schemes. The results of this innovative scheme are eagerly awaited. Thepotential for successful replication in other schemes seems considerable.


Chapter III. JakartaC. Summary and recommendations

The housing situation in Jakarta is very alarming, in particular because of the rapid rate of urbanization. Yet,there are some positive signs, and many actors are working hard to improve the situation. For the moderate - as well asthe middle - and high-income groups, housing is no longer a major problem. The situation for the low- andlowest-income groups is, however, quite desperate. One of the main problems faced by the low-income groups istransport. Most affordable low-cost housing is built in the outskirts of the city, i.e., in the Botabek area, while mostjobs for this group are located in the centre of the city. The KIP is thus of major assistance to the low-income groups,since it has enabled them to get access to affordable housing close to their area of employment.

Perumnas and BTN provide subsidies for the lowest-income people, by offering RSSs and rental flats in theKemayoran area. Although the RSSs in Kemayoran are targeted at the poorest group (those with monthly incomesbetween Rp. 80,000 and Rp. 150,000) reality has shown that other groups, like the lower-low income group, reap thebenefit. Likewise, the rental flats were targeted at groups with incomes as low as Rp. 70,000, while reality has shownthat the target group - who mostly receive their incomes from employment in the informal sector - are unwilling to livein flats and find it impractical to live in a permanent location (due to the nature of the income-generating activities theyare involved in).

The main recommendations on improvement of the housing-delivery system in Jakarta can be summarized asbelow:

Intensification of the provision of housing for the lowest-income groups.

Building of more rental flats for the lower-low- and lowest-income groups.

Increased emphasis on the development and promotion of rental housing in kampung areas, as part of KIP.

Since more than half of all housing in Jakarta is built by individual households, efforts should be made tomake regulations and procedures more compatible with the needs of this group.

The credit and loan systems should be developed to address the needs and potential of the lower-low- andlowest income groups.

The provincial government's decree forcing developers to set aside 20 per cent of the land area of adevelopment for low-cost rental flats should be enforced and supported. Many developers are reluctant tofollow this decree, mainly due to the scarcity of cheap land. The Government should thus, as a kind ofcompensation, help developers with the processing of location and building permits and other administrativeobstacles.


Chapter IV. Bandung

Bandung is located in a mountainous area about 700 metres above sea level in the centre of West JavaProvince, of which it is the capital. The city covers an area of 17,000 hectares. Due to its mountainous and cool climateand its lower population density, Bandung is considered an ideal place to live by many Indonesians. Thousands of itsbetter-off inhabitants have thus decided to live in Bandung and work in Jakarta. This is possible since the distancefrom Bandung to Jakarta is only about 180 km, a distance covered by five daily flights (15 minutes) and seven specialtrains (3-4 hours). Bandung is a popular tourist destination, and the city's development aspiration is to become anational centre for government (some central-government agencies are already located in Bandung, along with manyresearch centres), commerce, industry, education and culture.

The population of Bandung city in 1992 was 2.1 million. The annual population growth was 3.48 per cent, thussignificantly lower than in Jakarta. The population in 2005 is expected to reach 2.5 million (Bandung Municipality,1991). The average monthly income of the inhabitants is estimated to be about Rp. l00,000. The economic growth rateof Bandung city is about 11 per cent per annum. Bandung has a big container terminal in Gedebage town, with a directline to the Tanjung Priok harbour in Jakarta.

Bandung's first master plan was prepared in 1971. It became the base for the Bandung Urban DevelopmentStudy (BUDS) in 1976, which led to the implementation of the Bandung Urban Development Project I (BUDP-I) in 1979(see also section IV.B.1.b.i ). BUDP-I included kampung improvement, as well as drainage, sewerage, solid-waste andsites-and-services improvements. The Antapani sites-and-services project, which was part of BUDP-I, stimulatedmany private developers, like Margahayu Raya (see section IV.B.2 ), to develop mass housing in various parts of thecity. The Bandung Area Water Supply project (BAWS) was carried out simultaneously with BUDP-I. Both werefunded by loans from the ADB, yet, the two projects were not coordinated.

Due to the rapid rate of urbanization in Bandung, further growth is planned within the metropolitan area ofBandung, Bandung Raya, rather than in the old Bandung city. The metropolitan area includes the 10 surrounding citiesof Lembang, Cimahi, Padalarang, Soreang, Banjaran, Ciparay, Majalaya, Rancaekek, Cileunyi and Jatinanggor.

After the completion of BUDP-I (1978-1986), BUDP-II (1987-1995) was developed in 1985 with the BandungUrban Transportation Project (BURP) financed under an IBRD loan. The BUDP-II programme renewing the densestkampung area in Bandung, in Industri Dalam Street (INDAL), with low-cost walk-up flats, serves as a model for furtherdevelopments by Perum-Perumnas and private developers. The INDAL development was a response to the CentralGovernment' s decree on development of high-rise housing on empty government land. It is being carried out incooperation with the Directorate of Housing and the Institute of Human Settlements of the Ministry of Public Works,with the objective of developing 220 units of flat and maisonette housing (phase one).

Because of the revised master plan of 1986, the Central Government in 1987 approved the enlargement ofBandung city to include the surrounding areas outlined above. The city size was thus doubled from 8000 ha to 17,000ha. This enlargement led to the development of a new revised master plan in 1992. The main policies on housing andliving development towards the year 2005, in the latest Bandung master plan, include the following (BandungMunicipality, 1991):

Continued development of KIP;

Development of new housing in the extended Bandung area;

Controlled development north of the city for ground-water preservation;

Provision of community utilities and infrastructures in the extended area;

Improved administrative procedures, such as planning permits, building permits and developmentassistance.


Chapter IV. BandungA. Scope and scale of the shelter problem

The implementation of the BUDP and BA WS infrastructure projects has increased housing expectations in thecity. Yet, despite the growing rate of urbanization, the shelter problem in Bandung is still not given the priority itdeserves in the Municipality's policy. The massive BUDP-I, BUDP-II, BAWS, and BUTP projects have all mainlyaddressed the infrastructural problems. Yet, as was mentioned above, some efforts were given to housing.



1. Housing stock

In 1992 there was a total of 337,997 dwelling units in Bandung (see table 35 ). One third of the units are either inneed of improvement (semi-permanent dwellings) or rehabilitation (temporary dwellings). The housing stock can bedescribed as either formal or informal housing. The formal housing conforms to planning and building regulations andis financed and constructed through transactions in the "modem" sector of the economy, by both public and privatesector actors. This type of housing is occupied almost exclusively by moderate-, middle- and high-income households.About 35 per cent of the population are housed this way.

The informal housing has been developed without regard to official standards and regulations, and has beenbuilt without the assistance of formal institutions or building enterprises. Most occupiers are low-income households.About 65 per cent of Bandung's population are housed this way, occupying 50 per cent of the developed land, mostlyin kampung areas. The vast majority of semi-permanent and temporary housing, and some of the permanent housesare in this category.



2. Housing needs

Bandung's role as capital of West Java has attracted many people from the surrounded cities and from all partsof the province. The population growth rate of 3.48, coupled with an average household size of 4.7 in 1990, (11) hascreated an enormous pressure on the housing-delivery system in Bandung. If each household in Bandung shouldhave a house of their own the total housing need in 1990 would be 437, 898 units. If this is compared with the figures in table 36 the immediate housing shortage can be estimated at about 100,000 units. Furthermore, an additional 37, 000temporary units should be replaced. The Bandung master plan estimates the need for additional housing, to take careof a growing population, in the 1990-2005 period to 195,000 units (Bandung Municipality, 1991). Bandung's totalhousing need up to the year 2005 would thus total 332,000 units, i.e., 22,130 units each year until 2005. Most of theabove shortage is currently met in the kampung areas where the legality of housing is still questioned.


Chapter IV. BandungB. Actors and housing supply

The main actors in housing supply in Bandung, as in the rest of Indonesia, are the households themselves. Yetthe role of the formal sector has been relatively stronger in Bandung than in Jakarta. More than 19 per cent of thecurrent housing stock has been built by Perum-Perumnas (16,535 units) or members of REI (48,151 units) during thelast 18 years (BTN, 1992a). According to figures from BTN, the most popular housing type is the core house of 21 m2.About 90 per cent of the more than 71,519 loans given by BTN were given to such units (BTN, 1992b). The total loanamount provided by BTN in Bandung up to 1992 was Rp. 330 billion.



1. Public-sector actors

Both central-government and local-government agencies are involved in housing provision in Bandung. Themain public-sector actors are outlined below.



1. Public-sector actorsa. Perum-Perumnas

By 1992 Perum-Perumnas had constructed nearly 15,000 housing units in Bandung (see table 36 ).Perum-Perumnas' main target group in its early projects was the upper-low-income group, through the development of"simple houses." Only two of the earlier projects, Sadang Serang and Sarijadi (non-flat), included core housesintended for the lower-low-income group. In its last two projects (Antapani and Rancaekek), Perum-Perumnas hasattempted to develop large quantities of core houses. The latest project, Rancaekek, includes an experimental buildingof RSSs.

The development in Antapani was made in cooperation with the Municipality of Bandung under BUDP-I. Thiswas the largest Perum-Perumnas project so far in Bandung and the plans involved acquiring 100 hectares of land toprovide 7800 housing plots for 40,000 low- and moderate-income people. A variety of plot sizes and plot developmentoptions were proposed to offer housing opportunities to this target group.



1. Public-sector actorsb. Bandung Municipality

The Municipality of Bandung has not implemented any housing projects on its own, except to house its ownemployees. The Municipality has, however, cooperated with a private-sector housing developer to develop somehousing complexes.

The main problem of the Municipality when it comes to housing supply is that it has no special unit or agencyin charge of housing developments. There is a Housing Section (Dinas Perumahan) in the municipality structure, yet,its role is only to register and maintain the existing housing. (12) Housing development programmes are coordinated bythe City Planning Section, in cooperation with the Municipal Planning Board (Bappeda).

The most important human settlements developments in Bandung have, however, been carried out under thesupervision of the Municipality of Bandung, i.e., BUDP and the INDAL renewal project. These two developments arediscussed in the sections below.




i. Bandung Urban Development Project (BUDP)

The two huge BUDP projects were carried out with the assistance of the Directorate General of HumanSettlements of the Ministry of Public Works, with loans from ADB. A special task force, Dewi Sartika, was created bythe municipal government to implement the projects. Two of the five components of BUDP-I were directly related tohousing supply, i.e., KIP and the sites-and-services development in the Antapani area, (13) while the main housingcomponent under BUDP-II was the urban renewal project in INDAL.

The kampung improvements under BUDP were not specifically aimed at developing housing, but rather atpreserving the housing stock by creating a public environment that encouraged investment of those private resourcesavailable.

The KIP component of BUDP-I included the improvement of three kampung areas with a total population of108,000 on 385 hectares of land. The improvements proposed in the three kampungs were related to access, drainage,community facilities, water supply and sewerage, i.e., improvements that the kampung residents were unable toprovide on their own.

In BUDP-II the coverage was extended to seven kampung areas with a total population of 118, 137 people(25,284 households) on 185 hectares of land (Ministry of Public Works, 1986). The projects attempt to involve thekampung residents in the improvement programme in three ways:

Consultations during project planning;

Participation of community labour in public works construction;

The communities were given the responsibility for on-going maintenance of some components of thedrainage and solid waste improvements.

The main positive outcome of BUDP-I and BUDP-II, however, was not mentioned in the plans; that thekampung improvements enabled the communities to improve their houses, without fear of future demolitions.Furthermore, the fact that BUDP invested considerable amounts in improving the kampung areas gave the kampungdwellers a certain feeling of legality that had not been there before.




ii. INDAL Pilot Renew al Project

The INDAL renewal project was developed in cooperation with the Directorate of Housing and the Institute ofHuman Settlements of the Ministry of Public Works.

The project was initiated in 1991 to rehabilitate a deteriorated slum area in the centre of Bandung city on 20, 156m2 of government-owned land inhabited by 815 people in 208 households. The first phase of the project, which isunder implementation, includes the relocation of the inhabitants on an area of 11,040 m2. The second phase will see thedevelopment of additional residential units on the remaining 9116 m2 of land. If successful, this "land mutual ownershipproject" may be replicated to renew other slum areas on government land.

The first phase of the project includes the construction of 104 units of maisonette/flat housing of 18-36 m2, 52flats of 12 m2 and 24 m2, and 64 flats of 18 m2 and 24 m2. Some 4857 m2, or 44 per cent of the area, will be used for openspace. The total project budget is Rp. 4.8 billion, funded by local- and central-government budgets, the budget of theDirectorate General of Human Settlements and the inhabitants themselves. The inhabitants that used to haveownership rights will be eligible to buy units of 36 m2 while those inhabitants that in the past were renting will beoffered the remaining flats.



1. Public-sector actorsc. Government agencies

As was noted earlier, many central-government offices and universities are located in Bandung. Most of thegovernment agencies have developed housing schemes for their own employees. This is made possible throughcooperation with BTN or employees cooperatives or by the initiative of the agencies themselves. The main advantagethese agencies have over Perum-Perumnas or private-sector actors, is that it is easier for the government agencies toacquire land.

The provincial government of West Java, which has also located in Bandung, has also developed housing forits employees.



2. Private-sector actors

The total housing production of the members of REI up to 1992, was 48,151 units or nearly three times that ofPerum-Perumnas (BTN, 1992a). Most of these units were produced in some 65 major locations in the southern,south-eastern and eastern parts of the city.

Several large-scale contractors operate in Bandung city. The largest of them is P. T. Margahayu Raya.Margahayu Raya actively anticipated the increased housing demand and started its real-estate department on an areaof 120 hectares in the south-eastern part of Bandung. With the help of the credit facilities of BTN, Margahayu Raya'starget group was initially the low-income group. The economic situation - in particular the rising cost of land - has,however, forced it to reach the upper-low- and moderate-income groups only (still with credit from BTN). (14) WhenMargahayu Raya's housing production had exceeded 5000 units in 1986, it received the "Best Achievement Award" asa token of the Government's appreciation. Margahayu Raya's success can also be measured by the fact that acompanion company has developed two sites for the middle-income group nearby.

Other large-scale contractors operating in Bandung include, among others, Arcamanik, Kopo Indah and SumberSari Indah. Many small-scale contractors are also operating in Bandung. In contrast to the large-scale contractors,they acquire smaller plots of land and develop only up to a hundred or so units of housing. Yet, despite this limitedscale, the total output of the smaller contractors exceeds that of the large-scale ones.

While BTN has been the main source of housing credit for the low- and moderate-income groups, providingcredit to a total of 71,5l9 customers (up to 1992), Papan Sejahtera and private banks have provided credit to themoderate-, middle- and high-income groups. The Bandung branch of Papan Sejahtera provided a total of 3,113 loans inthe 1980-1992 period. The total value of Papan Sejahtera loans amounted to Rp. 47 billion, as compared with Rp. 330billion for BTN.

As in the public sector, it is quite common for private-sector business enterprises to provide housing for theiremployees. The number of units provided in this manner is, however, not easily available.



3. NGOs

There are a few NGOs operating in Bandung. Yet, their role is rather limited. Some NGOs provide a fewtemporary core houses for garbage collectors and becak drivers. In general, NGOs avoid getting involved in theprovision of shelter. This is partly due to the high cost and scarcity of land. NGOs concentrate on training, capitalassistance for economic activities and health instead. One major strength of the NGOs, is their ability to get access toforeign grants that can benefit low-income people working in the informal sector. The activities of two NGOs operatingin Bandung are outlined below; the Environmental Research Centre (PPLH) and the Institute of Community Self-help (LPSM).



3. NGOsa. The Environmental Research Centre (PPLH)

PPLH is officially a government centre under the Bandung Institute of Technology. In practice, however, it hasa semi-NGO character and role. One of its NGO activities is to help a group of 500 garbage-collector households thatwere evicted from their former squatter settlement. Because of the eviction, PPLH helped the community to find a pieceof land (2800 m2) on the fringe of Bandung. This was made possible with the assistance of other NGOs, including someforeign ones. Many bamboo huts and red-brick core houses have been developed. Furthermore, to manage thedevelopment, the community was trained to develop cooperatives and formed a local CBO, Yayasan Atap Bahagia("the Happy Roof Foundation").



3. NGOsb. The Institute of Community Self-help (LPSM)

LPSM is an NGO that helps poor people with various needs, including housing assistance. The formation ofthe Bina Karya cooperative, which was able to acquire 1.6 hectares of land and to build 120 housing units (on 42 m2

and 96 m2 plots) thereon, was the result of the activities of this NGO (see section IV.B.4.d ).



4. CBOs and cooperatives

The UNDP CBLCH programme is actively helping slum dwellers in Bandung to form CBOs or cooperatives. The CBLCH programme supports the members of such organizations in getting access to various forms of credit, forinstance, KPKSB, KPR, KK, and KUK.

While CBOs in the past have been rare in Bandung, cooperatives have been quite common. Most of thecooperatives do not, however, deal with housing provision per se, but rather with specific economic activities. TheGovernment encourages communities and business enterprises to develop housing savings cooperatives. Thisinitiative was made possible by the many new credit schemes offered by BTN (see section II.B.2.a )

Below follows a brief outline of the activities of some selected CBOs and cooperatives in Bandung.



4. CBOs and cooperativesa. Tamansari Rental Housing

Tamansari sub-district (kelurahan) is strategically located, surrounded by 10 universities and manygovernment offices. The location is earmarked for the fast development of rental housing for the low- andlowest-income groups employed in the formal and informal sectors. The growing need for cheap rental housingstimulated a local CBO, LKMD, to help its members gain access to BTN's credit facilities. Partly because theprogramme serves the lower-low- and lowest-income groups - those with monthly incomes of Rp. 60,000-150,000 -LKMD is supported by the Municipality. LKMD receives technical assistance from the Institute of HumanSettlements.



4. CBOs and cooperativesb. Palasari arisan Housing

The Palasari arisan Housing caters mainly to the low-income people working in the informal sector withoutaccess to formal-sector credit facilities. The instalment to the arisan group is about Rp. 4,000 weekly or Rp. 15,000monthly. (15) By 1992 it had attracted 92 participants. Since its beginning in 1974, Palasari arisan Housing has built atotal of 71 houses.



4. CBOs and cooperativesc. St. Borromeus Hospital Employee Credit Cooperative<

The leaders of the St. Borromeus hospital cooperative have been able to get soft loans from private enterprisesin Bandung to develop housing for its members, i.e., employees of the hospital. The hospital subsidizes thecooperative by paying 20 per cent of the down-payment on the house as an interest-free loan. The rest of thedown-payment is paid from the loans received from the above-mentioned private enterprises. The loans are repaid bythe members over a 10-year period.

The cooperative has bought a plot of land totalling 2600 m2, and has so far built 71 detached houses of 27 m2

(54-70 m2 plots) and 36 m2 (72-90 m2 plots). The unit price is about Rp. 3,500,000. Although small-scale contractorsassist with the construction of houses, the employees are encouraged to participate actively in the constructionprocess.

The main criterion to be eligible to get a house unit from the cooperative is a monthly income of between Rp.100,000 and Rp. 150,000. With the assistance of some foreign NGOs the cooperative now controls a capital of Rp. 192million.



4. CBOs and cooperativesd. Bina Karya

The Bina Karya cooperative was originally aimed at offering general assistance to textile factory workers. It wasonly later that it developed into a housing cooperative. The cooperative has developed a piece of land of 1.6 hectareswith 120 housing units. Decisions on house and plot sizes were taken by the community itself with the assistance ofLPSM (see section IV.B.3.b ). The physical development of the site has taken a long time, but this fact is a reflection ofthe limitations restricting a rather powerless low-income community. The price of a plot of land and a house unit in thefirst stage of the development was Rp. 2,400,000, with a down-payment of Rp. 400,000 and monthly instalments of Rp.15,000 for a period of 12 years. The size of the down-payment, however, made the housing unaffordable for mostmembers of the cooperative. The members were then allowed to move into the houses, even without having paid thedown-payment in full. The reason for this decision was one of economics rather than welfare; i.e., for the sake ofmaintenance it was seen as an advantage that the house was occupied by a responsible owner rather than being leftempty.


Chapter IV. BandungC. Summary and recommendations

As was shown above, the total housing need of Bandung to the year 2005 is 332,000 units, i.e., 22,130 unitseach year until 2005. The housing production planned in the Bandung master plan for the 1990-2005 period includesonly 194,576 units. This implies that even by the year 2005 Bandung will be faced by a serious housing shortage. Thequestion that remains, however, is whether the volume of housing production suggested in the master plan will be met.

The master plan expects that the demand from the top 20 percentiles of the population (i.e., high- andmiddle-income groups) will be met by the private housing market, while those between the 20 and 80 percentiles areeligible to participate in sites-and-services schemes. The housing demands of the bottom 20 percentiles are expectedto be met by the kampung areas, provided only with basic infrastructure.

The BUDP programme had very positive effects for those living in kampung areas. Yet the fact that BUDPabsorbed massive funds implied that it could not be replicated. The result was that activities stopped when the ADBloan was spent. Similar large-scale public schemes are thus not very likely in the future and more emphasis has to beplaced on the potential of the private sector.

Furthermore, the practical application of the Bandung Metropolitan Area concept should be intensified toavoid further invasions in the kampung areas by people from the surrounding towns. More effort should be placed onpersuading people to remain in the adjacent towns.

Bandung is in a fortunate position compared with Jakarta, since there are still large tracts of empty land withinthe city limits. Physical planning is a key factor to achieve a balanced development of these areas.


Chapter V. Alleviating the housing problem in Indonesia: Conclusions and recommendations

The above discussion has revealed that the actors involved in formal-sector housing production in Indonesiahave managed to build nearly I million urban and about 700,000 rural units since the initiation of interventionisthousing policies during Repelita-II. This is quite an impressive accomplishment by most standards. Yet, the provisionof housing for about 5 million urban and 3.5 million rural dwellers during an 18-year period should be considered in thelight of a population increase of about 35 million in urban areas and 25 million in rural areas during the same period.

Formal-sector housing supply in Indonesia has thus been unable to keep up with demand. Most Indonesianshave thus experienced a deterioration of their access to housing during the last two decades. More than 85 per cent ofthe current housing stock in urban areas of Indonesia has been produced by the informal sector. In the rural areas, 99per cent of the housing is produced by the informal sector.

Yet the situation is not all bad. Several useful lessons have been learned, the main one being the realization thatthe public sector is unable to address the housing shortage through direct intervention. The national housingcorporation, Perum-Perumnas - that at one time was expected to solve the housing problem - has proved itself unableto address make any significant impact on the shelter-delivery process. The total housing production ofPerum-Perumnas during the 1974-1991 period was only 216,556 units, i.e., housing for only one sixtieth of allIndonesians born during the same period. Following the realization of the failure of public-sector housing production,the growing importance of private-sector shelter delivery is a very promising sign. The fact that private-sectorentrepreneurs have discovered that it is possible to make a profit from shelter provision for the low-income group maybe what is needed to make a real impact towards reducing the housing shortage in Indonesia.

The main losers in the housing market in Indonesia are the lowest-income households. The planned activitiesduring Repelita-V on developing serviced plots and 20,000 units of rental housing, as well as the decree in Jakartaspecifying that 20 per cent of the land in all new developments shall be set aside for low-cost rental housing, may beable to alleviate the situation for some selected few among the lowest-income group. Yet, judging from the experienceof the past, it is more than likely that the fruits of these initiatives will be reaped by others than the lowest-incomegroup.

The introduction, by BTN, of innovative savings and loan schemes is another important factor that may pointtowards an improved housing situation in the years to come. The government support for improved saving habitsmay, in the future, prove to be the most important factor towards addressing the housing shortage.

There seems to be considerable scope for improving shelter delivery by encouraging and assisting theactivities of NGOs, CBOs and cooperatives. The activities of the CBLCH programme towards bridging the gap betweenthe informal-sector housing demand and formal-sector housing-finance mechanisms seem rather promising.

The KIP is, without a doubt, the most important intervention in the housing-delivery process in Indonesia. Thisis so although it is not really a shelter-delivery programme at all. By improving the infrastructure in the kampung areasKIP had, by 1989, directly influenced the lives of 15 million kampung dwellers. The public support for improvement ofthe infrastructure in the kampung areas was the recognition needed to give the kampung dwellers a feeling of securitythat enabled them to invest in improving their own houses, without fear of public demolition squads. Many owners ofkampung dwellings have also added rooms to their houses for rental purposes. The significance of KIP ishighlightened by the fact that most people living in the kampung areas are from the low- or lowest-income groups.

The discussion above has revealed several obstacles to an efficient shelter-delivery process in Indonesia.These can be summarized as obstacles relating to credit and affordability, land, official regulations, transport, andbuilding materials. These obstacles are discussed below with some recommendations on how they can be addressed.


Chapter V. Alleviating the housing problem in Indonesia: Conclusions and recommendationsA. Access to credit and affordability

Housing finance is in very short supply in Indonesia. High rates of inflation and the high cost of land areamong the main reasons for this. The lack of affordable long-term credit is increasingly being recognized as a majorimpediment to the provision of urban shelter. Although the official rate of inflation has been reduced to 5 per cent perannum, the Government has realized that the high inflation and devaluations of the past have increased the price ofhouses, and decreased the ability of the Government to subsidize low-income housing. The cost of subsidies during atime of high inflation and devaluations nearly broke the back of BTN. The Government has thus removed subsidies forall types of credit but those for core houses and RSSs.

The current market rate for housing credit of about 23 per cent per annum gives a real annual interest rate ofabout 18 per cent. Most Indonesians find this quite unaffordable and are thus building their houses outside the formalsector. This has led to a situation where formal-sector housing supply has shifted its focus away from the poor. It isnow mainly limited to serve the upper-low- and moderate-income groups.

The fact that the Government has kept credit subsidies for the construction of core houses and RSSs iscommendable. The real interest rates for these types of credit are currently 7 and 5 per cent per annum. Yet, therequirements made on applicants for such credit are of a nature that have made these types of credit unavailable forpeople with irregular incomes from the informal sector, thus leaving out most people classified as belonging to thelow-income group. Those that benefit from these credit schemes are mainly government employees. The real poor -those with incomes below the poverty - line have only rarely access to formal-sector credit.

The concept of enabling should be used in the field of low-cost housing finance as well. More flexible financemechanisms should be encouraged. That would include acceptance of irregular repayments catering to the abilities ofpeople employed in the informal sector. Experiences with, for instance, arisan have shown that the low-income groupsare able to save for housing purposes. The Government should actively support the formation of cooperatives andinformal savings-and-loan mechanisms, which could enable most of the poor to address their housing-creditrequirements. The steps taken by the Government (through BTN) in the last few years, offering several newunconventional credit schemes that enable the informal sector to build their houses without the assistance of formalhousing developers, are very positive developments.


Chapter V. Alleviating the housing problem in Indonesia: Conclusions and recommendationsB. Access to land

The provision of urban land for housing projects has in the past led to increased land prices and to aneconomic boom for most sectors involved in the development. Yet, the poor management of land tenure is a majorobstacle to shelter delivery in Indonesia. The widespread practice of land speculation only serves to make thesituation worse. This has led to the current situation with unclear tenure rights or lack of tenure being the rule. If the"owner" has no recognized tenurial rights to the land he or she occupies, even a well-constructed house is useless ascollateral in the formal credit market.

Experience has shown that lack of tenure also impedes investments in informal housing, which often flourishesin low-income neighbourhoods once tenure is granted. Therefore - since the informal sector is the main force inhousing provision - land regulation to grant or protect the land tenure of urban low-income people, especially inkampung areas, should be enforced by the Government. Only in this way can the informal sector show its realpotential.

The Government should make an effort to curb the activities of land speculators, it should improve theland-tenure system and it should improve the supply of land. In the current situation, large urban areas remain un- orunder-utilized due to speculation or inefficient land management. The Government should intervene directly in the landmarkets through large-scale land acquisitions. This might not only improve land supply, it might also reduce thecurrent rapid escalation of prices. The first step towards addressing these issues would be the adoption of new landlaws and regulations, and a strengthening of BPN.


Chapter V. Alleviating the housing problem in Indonesia: Conclusions and recommendationsC. Building regulations

Excessively high building standards and unwieldy bureaucratic systems that impose costly delays in obtainingbuilding permits are serious obstacles to an efficient housing supply. The consequence is often that builders bypassofficial procedures and construct units that are illegal or do not conform with official regulations. While these unitsmay provide decent housing, they usually do not qualify for formal financing.

If the Government is serious about changing its role from being a provider to being an enabler, it should adoptbuilding regulation that enable the inhabitants of kampung areas to get building permits for their existing or plannedhousing units. The experience with KIP has shown that kampung dwellers are likely to improve their housing if theyfeel that their tenurial situation is supported and safeguarded by the Government. The granting of building permits forcommon people would be regarded as a formal government approval of their existence. One positive development inthis respect deserves mention. Occupants of housing units built without building permits are now able to haveelectricity installed in their homes.

While formal housing is increasingly beyond the affordability of most people, the informal sector has in thepast provided most Indonesians with affordable housing. Instead of evicting these people and demolishing theirhomes, the authorities should assist them to improve their dwellings or to build new and better ones.


Chapter V. Alleviating the housing problem in Indonesia: Conclusions and recommendationsD. "Positive" regulations on housing developments

While some government regulations should be eased, some should be strengthened. The Government onceurged private developers to build houses according to the 1:3:6 formula (i.e., for each high-income house they shouldconstruct three middle-income and six low-income houses). No formal regulations or sanctions were, however, used tocarry out this recommendation. The result has therefore been that the appeal only rarely has been followed. Thedevelopers prefer to build higher standard housing that gives higher per-unit profits. Since urban land is in very shortsupply, it seems that developers maximize profits per unit of land rather than per unit of capital invested.

The Government is now eager to enforce the above 1:3:6 policy. The Ministries of Housing, Public Works andHome Affairs are currently perfecting a decree to be published in the near future.

The policy recently adopted in Jakarta requesting all large housing developments to set aside 20 per cent oftheir area for the construction of low-cost flats (see the introduction of chapter III) also exemplifies a regulation that, ifenforced, could increase housing supply. Another option is the adoption of legislation that supports the introductionof cross-subsidy schemes on private-sector housing developments.


Chapter V. Alleviating the housing problem in Indonesia: Conclusions and recommendationsE. Transport

Due to the rapidly increasing land prices, it seems that cheap housing can only be built in the urban fringeareas where the land price is still low. Since the place of employment normally remains the same after having moved,and the place of work tends to be further away from the new house, the populations of these new developments arefaced by a serious (and costly) transport problem. It is not only the employed household members that experienceincreased transport expenses, the same normally applies to the cost of getting to school, to the market or to shops.

The transport problem is further aggravated by the fact that most new housing developments, in their earlystages, are poorly served by public transport (buses, minibuses and taxis as well tricycles and pedicabs). TheKemayoran low-cost rental flat scheme exemplifies this. The development should in theory be affordable to thelowest-income people with monthly income as low as Rp. 70,000. In practice, however, only those with their ownmeans of transport were able to move to Kemayoran.

The transport problem implies that the poor working in the informal sector (as vendors or street hawkers sellingdaily goods or newspapers at street crossings, for instance) have to live in the kampung areas next to their place ofwork. Urban renewal projects have often forced them to move far away from their place of work, resulting in transportproblems that inevitably forced them back into other slums areas closer to their place of work.


Chapter V. Alleviating the housing problem in Indonesia: Conclusions and recommendationsF. Building materials

The availability of affordable and culturally acceptable building materials, have in the past proved to be a majorobstacle to housing supply. In some small towns this has led to considerable problems for Perum-Perumnas. Thisproblem could be resolved by decentralizing housing delivery by allowing local municipalities to have their ownhousing supply systems with locally available building materials and acceptable housing types. In this aspect theurban areas could learn from the rural areas, where the rural dwellers for centuries built their houses from availablebuilding materials without any intervention from outside.

The authorities could create a better and more enabling atmosphere by allowing people to use different kinds ofavailable building materials (such as used wood or used industrial packs for instance). The Government should,through a network of PITBs, actively support the development of local building-materials and construction industriesand technologies. This would not only give people access to affordable shelter, it would also generate considerableemployment in these industries at the local level.


Chapter V. Alleviating the housing problem in Indonesia: Conclusions and recommendationsG. Decentralization and community participation

Local governments should, as far as possible, be encouraged to take part in housing delivery. Localgovernments can better influence the supply of land and have better knowledge of local aspirations.

Among the most neglected sectors in the housing sector are the NGOs, cooperatives and CBOs. These havefor years faithfully served the poorest groups. If foreign grants for housing delivery purposes could be channeledthrough NGOs, and if private contractors and other enterprises could be encouraged to channel part of their profits tothe NGOs, this would result in more houses being built for the lowest-income group. Serious effort should be made tolink NGOs, cooperatives and CBOs with the formal banking system. The experiments currently undertaken by theCBLCH programme open interesting future possibilities.

The main actors in the housing-delivery process in Indonesia are the people themselves. They have produced99 per cent of all housing in rural areas, and between 85 and 89 percent of all housing in urban areas. The fact thatpeople themselves, without formal-sector assistance, have constructed more than 37 million housing units is a silenttestimony to the effectiveness of the informal sector. Yet, there is considerable scope for further developing theresources of communities. While popular participation is a main part of KIP, it is still not widely practised in housingprojects.

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