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Featured — 11 October 2012

Indonesia’s plan to construct 1,000 apartment towers held a promise of lifting families from their slum dwellings. Looking back five years later, the plan – even then ambitious-  seems far-fetched amid a housing industry crippled by little government incentive and high land prices.

Currently, there are only 100 towers erected where more-affluent people live, going against its initial goal of providing affordable shelter to low-income families. With high land prices, the prospect of constructing low-income units was not a favorable outlook for developers.

“The program is a total failure because of poor planning, and there’s little stimulus from the government to make 1,000 towers a reality,” Indonesia Property Watch executive director Ali Tranghada told Wall Street Journal.

Indonesia’s housing ministry says the government took several measures to help the project regain momentum, including giving incentives to developers and providing loans. The price of low-income units was leveled at 144 million rupiah ($15,000). Banks, however, were reluctant to offer mortgages to “risky” low-income citizens, a factor that may have been overlooked by the government.

Sri Hartoyo, deputy minister for financing at the ministry, says he hopes things will start to look up this year with the new regulations, which allow developers to raise low-income unit prices to 216 million rupiah and extend the length of mortgage term to 20 years. Still, families didn’t see it as a step closer to having a decent place to call home. “There’s no way I can afford a place like that. I have to struggle just to make ends meet,” Mr. Sumarno, a janitor at a private company, said.

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