40-Year Mortgage Dilemma: Installments Around Rp700,000, But the Interest Lasts Into Old Age

The government is currently drawing up a subsidised home loan (KPR) tenor scheme of up to 40 years to ease monthly repayments and broaden access to home ownership for low-income residents.

Housing and Settlement Areas Minister Maruarar Sirait said the policy is a follow-up to the President’s directive for people to obtain homes with more affordable instalments.

“We are also discussing the follow-up to the President’s directive regarding tenor of subsidised KPRs up to 40 years so that instalments are lighter,” Ara, as he is known, said, quoted from his Instagram account @maruararsirait, on Tuesday (19 May 2026).

Ara explained that, based on government simulations, subsidised homes in Java and Sumatra with a price of Rp166 million currently have instalments of around Rp1,058,000 per month for a 20-year tenor.

If the repayment period is extended to 40 years, monthly instalments are estimated to fall to around Rp773,000 per month.

Under this scheme, the monthly payments are projected to be about Rp285,000 lower than for a 20-year tenor.

The government hopes that the reduction in instalments will broaden opportunities for workers such as labourers, farmers, informal workers, and even the younger generation to own their first home.

“This will open up broader opportunities for labourers, farmers, informal workers, young people, and low-income communities to own a decent home,” he said.

However, the government emphasises that the 40-year tenor is optional and will not be mandatory for all citizens.

“Nevertheless, this 40-year scheme is voluntary, depending on the ability and choice of each community,” he added.

Ara said that housing development is not solely about chasing the number of units, but also must take sustainability into account, including through an obligation to plant one tree in every house in newly built residential areas developed by developers.

A housing analyst and member of ITB’s Housing Sector Expert Group, Mohammad Jehansyah Siregar, described the plan for a 40-year KPR tenor as financial anaesthesia for the public.

In his view, the growth of equity or real ownership of the home progresses very slowly in the first two decades because much of the instalments go towards paying compound interest.