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DownloadDown Payment 0% and Economic Momentum:
The Urgent Shift Toward Vertical Housing for the Urban Middle Class
When Bank Indonesia reintroduced the zero down payment (DP 0%) mortgage scheme through the extension of Regulation No. 23/2/PBI/2021, which remains effective through the end of 2025, the public responded with significant enthusiasm. Amid rising housing prices and limited purchasing power, the DP 0% initiative is seen as a breath of fresh air—particularly for the growing urban middle class in the Greater Jakarta area (Jabodetabek). However, this policy goes beyond a mere financing solution. It is, in essence, a macroeconomic instrument which, if managed prudently, could serve as a broad-based economic stimulus. If mishandled, however, it carries the potential to exacerbate systemic risks.
It is important to recognize that the housing sector is not solely about shelter provision. It is a capital-intensive and labour-intensive sector, with strong multiplier effects on supporting industries such as construction, cement, steel, ceramics, furniture, and design services. By expanding access to home financing through DP 0%, demand in the housing market is expected to rise, thereby attracting further investment into the real economy. According to the Ministry of Public Works and Housing, every Rp1 trillion invested in the housing sector has the potential to create over 30,000 direct and indirect jobs. This is a strategic economic opportunity that cannot be overlooked, particularly in the context of post-pandemic recovery and declining household consumption.
That said, the macroeconomic benefits of the DP 0% policy will not materialize automatically. Without clear spatial planning and market segmentation, such financing incentives may worsen urban inequality, expand low-density sprawl, and place additional pressure on metropolitan infrastructure. This underscores the need to shift our focus from merely opening access to credit, to channelling that credit toward sustainable and productive housing models—particularly vertical housing in central urban growth areas.
Jakarta’s middle class, which has expanded rapidly over the past two decades, increasingly demonstrates high mobility, digital consumption habits, and a demand for efficient access to employment centres. Offering low-cost landed housing on the urban fringe is no longer sufficient. Instead, financing—including DP 0%—should be directed toward affordable apartments, privately owned vertical housing, and mixed-use developments integrated with public transportation systems. The concept of vertical housing is not only a response to land scarcity, but also a way to stimulate denser, more efficient, and more sustainable urban economic growth.
This raises a key question: how should the macroeconomic effectiveness of the DP 0% program be assessed? In my view, this evaluation should be grounded in three primary dimensions.
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First, we must consider regional productivity gains.Are the homes purchased under the DP 0% scheme located in areas with strong connectivity to economic centers and public transportation? If these homes merely contribute to the expansion of "sleeping suburbs" disconnected from jobs and services, their economic impact may be neutral or even negative.
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Second, we must evaluate the policy’s contribution to financial stability. There is a real risk that a surge in demand could lead to relaxed credit standards and increased exposure to non-performing loans. While Bank Indonesia restricts program eligibility to sound banks and qualified borrowers, market enthusiasm can lead to overly aggressive lending. The Debt-to-Income (DTI) ratio should be a primary monitoring tool—arguably more critical than Loan-to-Value (LTV).
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Third, the policy should be judged on its ability to create long-term urban value. Does this financing lead to the development of integrated, sustainable urban neighborhoods, or does it replicate old patterns—cheap housing in remote areas, lacking infrastructure, and ultimately abandoned?
In this context, the DP 0% program should be strategically targeted toward affordable vertical housing within urban zones that are well-connected to mass public transportation systems such as BRT, MRT, and LRT. National and local governments should align their efforts by offering subsidies, tax incentives, or streamlined permitting processes for developers willing to invest in this segment. Likewise, financial institutions must be guided by macroprudential frameworks that prioritize location- based and demographic-based lending, rather than merely responding to project-level metrics.
The limited availability of land and the soaring price of land have become serious obstacles in developing affordable vertical housing for low- to middle-income households. Data from Statistics Indonesia (BPS) reveals a significant housing backlog of around 12.75 million units, with only 63.15% of households currently living in decent housing. At the same time, land prices in strategic areas such as around the Lebak Bulus MRT station have already reached IDR 30 million per square meter, up from IDR 25 million in 2018, pushing the total development cost of a vertical housing unit to as high as IDR 300 million. This challenge is further exacerbated by the fact that, since 2010, land prices in Jakarta have increased at an average annual rate of 16%, far outpacing the growth of real wages, which have risen by only about 10% per year.
Moreover, there is a pressing need to establish an effectiveness index for the DP 0% program, which not only tracks the number of housing units financed but also assesses broader impacts—such as local economic growth, spatial efficiency, and the long-term viability of these housing developments.
Ultimately, the DP 0% initiative should not be seen as a simple policy to “enable home purchases without upfront payments.” Rather, it should be understood as a credit instrument with the potential to shape urban development and economic direction. If we can align financing strategies with the dynamic needs of the urban middle class— and steer incentives toward integrated, vertical housing solutions—then DP 0% can serve as a genuine catalyst for inclusive economic development, rather than a short- term populist gesture.
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