Indonesia to Issue Bonds for Affordable Housing, BI to Support in Secondary Market
Indonesia plans to issue government bonds to finance low-income housing projects, with the central bank, Bank Indonesia (BI), pledging to purchase the debt in the secondary market.
The finance ministry will raise funds through a bond issue to expand the government's home ownership loan program, Finance Minister Sri Mulyani Indrawati announced. The government allocates annual subsidies for mortgages with low down payments and interest rates of 5% for low-income earners.
BI has committed to buying the bonds in the secondary market, further supporting the government's goal of providing 3 million affordable houses per year. This move builds on BI's earlier commitment to acquire over $9 billion worth of bonds in the secondary market this year.
Rajeev De Mello, portfolio manager at Gama Asset Management SA, expressed concerns over the central bank's pre-commitment to specific housing market-related bond issues, citing potential impacts on macroeconomic stability and the rupiah's value.
The support for affordable housing aligns with President Prabowo Subianto's priorities. BI has previously announced a reduction in reserve requirement ratios for banks extending mortgage loans, increasing liquidity incentives for the housing sector by up to 80 trillion rupiah ($4.9 billion).