Indonesia Weighs 30-Year Mortgages to Rescue a Precarious and Squeezed Middle Class

JAKARTA, Investortrust.id — Indonesia is looking for a new way to house a restless demographic: the aspiring-middle class. Finance Minister Purbaya Yudhi Sadewa has called on the state housing savings agency, BP Tapera, to broaden its lending umbrella beyond the traditionally poor to include those with "transitional" incomes—workers who are technically above the poverty line but are increasingly priced out of the modern dream of homeownership.

The proposal, unveiled during a high-level committee meeting on Thursday, suggests a radical stretching of the Indonesian financial fabric: a 30-year mortgage. By extending the current 20-year maturity limits, the government hopes to lower monthly payments enough to clear a glut of unsold subsidized homes. Last year, the government’s flagship housing program, the Housing Financing Liquidity Facility (FLPP), managed to move only 278,868 units against a target of 350,000.

This demographic pivot is not merely about social welfare; it is a cold calculation for survival. Indonesia’s "aspirational" middle class—a group that the World Bank and local economists warn has faced mounting pressure in recent year—is the missing engine in the nation's 8% growth ambition. While the wealthy and upper-middle class drive 70% of total consumption, the 75 million people stuck in the lower-middle tier contribute a mere 17%, hampered by stagnant wages and the rising costs of clothing, food, and shelter.

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Stretching the Tenor

"I have asked BP Tapera to formulate a strategy to ensure this year’s 350,000-unit target is actually met," Purbaya stated. "The strategy Mr. Minister [Housing Minister Maruarar Sirait] mentioned is the maturity length. If possible, let’s just go to 30 years. It makes the range longer and the monthly installments cheaper."

The Finance Minister believes that if state-backed lenders lead the charge with 30-year terms, private banks will be forced to follow suit. This "trigger effect" is intended to supercharge the property sector, which has a massive multiplier effect on the broader economy. "We need the property sector to grow faster and faster so that our 8% target becomes visible," the state treasurer emphasized.

The 75-Million Person Problem

The urgency of Purbaya’s proposal is underscored by a sobering reality check from the Indonesian Chamber of Commerce and Industry (Kadin Indonesia). Aviliani, Kadin’s Vice Chair for Macro-Micro Economic Policy, noted that the lower-middle class is currently the "weakest link" in the domestic consumption chain.

"The national budget (APBN) only contributes about 8.7% to GDP. Investment accounts for 30%, and consumption is the heavyweight at 57%," Aviliani explained. "The problem is that the 75 million people in the lower-middle class saw their incomes drop. They are the ones struggling."

The shrinking of this class is a significant headwind. While the poorest 25 million people are shielded by direct cash transfers (BLT), and the top tier remains resilient, the "middle-awkward" group has no safety net. They are too rich for handouts but too poor to afford the current 15-to-20-year mortgage structures offered by commercial banks.

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A Call to the Private Sector

Kadin is now pushing the private sector to step into the gap. Aviliani argued that while government regulation like the 30-year mortgage is a start, the ultimate solution is job creation that allows this 17% consumption segment to move into the 70% "active" consumption group.

As BP Tapera gears up for 2026, the stakes are high. The agency currently works with 40 distributing banks and over 8,000 developers across 33 provinces. If the 30-year mortgage becomes the new standard, it could be the "golden ticket" for millions of Indonesians currently stuck in rental limbo—and the fuel the government needs to prevent a protracted middle-class decline.