Indonesia : housing sector assessment

In the years since that study, real incomes have risen, and housing consumption has grown. As in 1988, the informal sector meets much of this demand and has proven very adept at providing housing commensurate with the purchasing power of the populace. It has not been able to provide the necessary infrastructure, however: water, sanitation, drainage, and sewer facilities lag far behind development. Additionally, reliance on the informal sector has kept credit from playing a significant role in housing acquisition. In the formal housing sector, the private sector has become increasing important, but the legal and institutional framework needed to support large-scale, low-cost formal housing construction by the private sector is not yet in place. The most important issue facing the Indonesian government is to facilitate the process whereby the private sector replaces the public sector in formal housing development, and formal development replaces informal development. To do this, the government needs two kinds of policy advice: detailed advice on issues such as land policy, infrastructure standards, secondary mortgage markets, and alternative mortgage instruments; and macro-level advice on the efficient role of the public sector in housing development.