The government continues to tout its ambitious target of building three million homes per year. Policy shifts could trigger a surge in non-performing loans.
PRESIDENT Prabowo Subianto seems reluctant to admit that his pledge to build three million homes per year is a difficult goal to achieve. It was an overambitious target to begin with, and the government’s persistence in pursuing the project could actually create new problems down the road.
From time to time, Prabowo brings up his campaign promise to build three million homes per year. The latest instance was during the International Labor Day, or May Day, parade at the National Monument in Jakarta. During his speech, he again declared that he would build 100,000 affordable apartments with supporting facilities such as hospitals, schools, and transportation systems.
In reality, however, various efforts made during Prabowo’s first year and a half in office to address the 9.9 million-home housing backlog have been far from the mark. As of April 2026, only 54,000 homes had been built through the Housing Financing Liquidity Facility (FLPP) program, well below the administration’s 3 million-a-year target. This target is broken down into two projects: constructing 1 million apartments in urban areas and renovating 2 million landed houses in fishing villages and rural areas. This year, the government pegs the FLPP quota at 350,000 homes.
Caught between promises and overly optimistic expectations, the Ministry of Housing and Settlements advocates for a string of policies that could pose even greater risks. One example is the latest Financial Services Authority (OJK) rule that relaxes the requirements in the Financial Information Services System, allowing borrowers with less than Rp1 million in their credit history to apply for subsidized mortgages. This policy carries significant risks because it could drive up banks’ non-performing loan (NPL) ratios.
Then there is the policy of extending the term of subsidized housing loans to 30 years. This is extremely risky because the total interest will be enormous, and the risk of default will be significantly higher. Ultimately, homebuyers will be forced to carry a long-term debt burden, still paying their mortgage well into their retirement years.
Not content with regulatory acrobatics alone, Prabowo also establishes new agencies to facilitate his ambitious three-million-homes project. Despite the existence of a dedicated ministry, he established a Housing Task Force chaired by his younger brother, Hashim Djojohadikusumo. Recently, there has also been a discourse about creating a new institution: the Agency for the Acceleration of Public Housing Development.
Considering how slow the new home construction project is progressing, the government should have recognized that building three million homes a year is an impossible mission. Especially given the state’s limited fiscal space, the government ought to prioritize which programs are worth pursuing.
Program prioritization should be based on the urgency of the problem. The problem with housing in rural and coastal areas, for instance, is not a shortage of available residences, but rather the poor condition of existing structures. Thus, renovations are the solution, and they should be implemented immediately. Doing renovations is also less likely to stir up conflicts because the land is free from disputes.
From a budgetary perspective, a home renovation program is more realistic because it is far less expensive than building apartment towers in urban areas. A renovation-based initiative would allow funds to be used more effectively to reach a wider range of target groups in rural and coastal areas. Amid today’s economic constraints, it is imperative that the government adopt a realistic approach to ensure that meeting people’s basic needs remains a priority.
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