ADB provides $300 million to finance housing in Indonesia
JAKARTA: The Asian Development Bank (ADB)'s board of directors has approved a US$300 million rupiahdenominated program that will provide fixed-rate loans to private commercial banks for mortgage on-lending.
"There is a large, unmet demand for housing finance in Indonesia, along with limited access to long-term rupiah funds, particularly at fixed rates," Philip Erquiaga, the director general of ADB's Private Sector Operations Department (PSOD) said in a statement.
"The Housing Finance Program will help to improve access to finance for a broader segment of consumers, including first-time moderate income home buyers. Additionally, developing the housing finance market in Indonesia is important, as the financing of housing plays a major role in the stability of a country's entire financial system."
Indonesia currently has an estimated shortage of about 8 million homes. With rapid urbanization, particularly in the capital Jakarta, an additional 800,000 homes annually for the next 20 years are needed. At the same time, mortgage lending by commercial banks is limited and largely confined to higher income groups, with banks finding it difficult to source long-term funds to support mortgage finance.
A key element of the program will be technical assistance to help participating banks strengthen mortgage underwriting skills. This technical assistance is being funded from an ongoing Housing Finance Capacity Development technical assistance project covering South and Southeast Asia. "Technical assistance training tailored to the needs of each bank will help boost their skills and this is critical for the prudent growth of the mortgage market in Indonesia," said Christine Engstrom, the senior investment specialist in ADB's Private Sector Operations Department. -PB News
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