40-Year KPR Tenor is Not a Solution, but an Endless Debt Trap

JAKARTA - The discussion of extending the tenor of the Home Ownership Loan (KPR) to 40 years is being widely discussed. Minister of Housing and Spatial Planning (PKP) Maruar Sirait stated that he was ready to "gaspol" to draft regulations on KPR with a tenor of up to four decades.

The discussion of extending the KPR tenor to 40 years was conveyed by President Prabowo Subianto. Hopefully, people can buy their own houses, rather than spending money to rent.

"So the 30 percent for our contract that we have reduced is for you to pay off your own house. The installment can be 20 years, if it can't be 20 years, 25 years. If it hasn't been paid off for 25 years, 30 years. If it can't be 35 years, 40 years, because workers can't run anywhere. Right? Because farmers and fishermen won't go anywhere, right?" said Prabowo during a speech on the occasion of Labor Day, Friday (1/5/2026).

One of the reasons for the emergence of the 40-year KPR tenor discourse is that low-income people (MBR) and workers have difficulty owning a home because they have been hampered by rising house prices and stagnant incomes.

In addition, the millennial and Z generations are also often said to have difficulty owning a house because the price of houses is too high. This scheme is expected to be an instrument for accelerating housing ownership for the millennial and Z generations.

However, the Executive Director of the Center of Economic and Law Studies (CELIOS) Bhima Yudhistira emphasized that the problem of settlement ownership in Indonesia is not in the duration of the KPR tenor.

Minister of PKP Maruar Sirait stated that this policy aims to reduce the monthly installment burden so that it is in line with the income profile of low-income people.

"We will immediately arrange it. We will invite the bank, the prospective recipient of the subsidized house, the developer, so that the rules can work," said Ara.

Indeed, by extending the loan duration, the monthly installment burden will significantly decline. According to Ara's projections, installments can be suppressed to IDR 800,000 per month. However, if you look at the financial calculations, there is the fact that the nominal reduction in installments is not proportional to the total payment efficiency.

For example, the assumption of the 2026 subsidized house price in the Jakarta, Bogor, Depok, Tangerang, and Bekasi (Jabodetabek) area is IDR 185,000,000. With the zero percent DP scheme and flat interest rate of 5 percent to full payment, with a tenor of 10 years and installments of IDR 1,962,200, the total principal and interest payment is IDR 235,464,000.

Meanwhile, for a 40-year tenor, the installment of Rp890,900, the total principal and interest payment swelled to Rp428,112,000.

CELIOS Executive Director Bhima Yudhistira assessed that the difficulty of the Indonesian people in having housing does not lie in the problem of installment tenor. He instead highlighted three things that are key factors in the selection of settlements, namely land prices, building prices, and high interest rates.

The long tenor of up to four decades actually becomes a new problem door for the community. Instead of being an instrument for accelerating home ownership, the long tenor can actually become an endless debt trap.

"The problem is not in the tenor, long tenor means it is paid off after retirement," Bhima told VOI.

"The main problem that is more serious is the price of land, the price of buildings, and overcoming property speculation. In addition, tax subsidies can also be more targeted so that millennials or those who have just started a family, as well as Gen Z can get a house close to the office," he continued.

If the price of houses remains high, said Bhima, it will not solve the housing problem for low-income people considering that the interest rate on mortgages in Indonesia is still too high.

"Don't let 10 years of paying off credit just to pay interest. So, the price of land, the price of buildings, and the interest rate, which should be the three key factors, not the tenor," Bhima explained.

When contacted separately, CELIOS Economic Director Nailul Huda confirmed that the tenor of up to 40 years will still burden the program recipients as long as the government does not control the price of the house. Huda said, the problem currently facing is that the growth of house prices is higher than the growth of people's income.

According to his notes, house prices rose by up to three percent, while people's incomes only rose by 1.8 percent. So, the gap between house prices and people's incomes is getting bigger.

"Even now, middle-income people are having trouble buying houses, while some of them are not eligible for FLPP (Housing Financing Liquidity Facility). For those who are eligible to get FLPP facilities, the price of the house is too difficult to reach," said Huda.

With a tenor of 40 years as discussed by the government, Huda assessed that this was risky given the shorter working period compared to the installment tenor.

If you follow this discourse, then there is a possibility that the program recipient still has installments after retirement. In this period, it is possible that the program recipient is no longer able to pay installments and even default.

Huda also doubted that this program would be looked at by young people, even though this group is included in those who are predicted to have difficulty owning a house. That's because there are still many of them who haven't worked.

"Even those who are working, their salaries are still relatively low, and in the end, many choose to live in a dormitory near the office. I am afraid that there will be a default when in the medium and long term of this program," he concluded.