Special Insurance to Shield Against 40-Year Mortgage Defaults

JAKARTA — The government is preparing a risk‑mitigation scheme in the form of insurance protection to support the implementation of the Mortgage Ownership Credit (KPR) with tenures of up to 40 years. The move is to anticipate risks during the loan period, from repayment failures caused by economic constraints to the risk of a borrower’s death.

Director General of Urban Areas at the Ministry of Housing and Human Settlements (Kementerian Perumahan dan Kawasan Permukiman, PKP) Sri Haryati explained that discussions on the 40-year tenor are not yet final because the government is still studying various protection schemes with developers and banks.

‘Actually it hasn’t reached final because there are several other discussions. Because when talking about 40 years there will also be insurance that will extend,’ Sri said at her office in Jakarta, on Monday (18 May 2026).

‘Looking at the average lowest income, and then looking at the maximum capacity to repay from income, that has all been checked,’ Sri said.

She explained that the longer tenor is designed to stay within the affordability bounds for subsidised housing loans.

‘We have also prepared a scheme for 40 years that fits their ability to service instalments,’ she added.

However, the government acknowledges that the longer tenor carries additional risks that need to be mitigated from the outset. Therefore, further discussions will be held with various parties.

‘We also must mitigate the risks that exist. Therefore, we will have another round with developers, banks and others,’ Sri said.

Meanwhile, Deputy Commissioner for Use of TAPERA Funds (Tapera) Sid Herdi Kusuma said that the risk-mitigation instruments under consideration include several types of insurance protections.

‘Regarding the risks during the tenor, as the Director General has already stated, we will discuss it more thoroughly,’ Sid said at the same event.

He noted that the protection scheme is projected to address a range of potential risks during the 40-year KPR tenor.

‘Among them are credit insurance, life insurance and fire insurance, which seem likely to address how to mitigate the risks during the KPR tenor,’ Sid said.

‘This programme’s main aim is to open access for the public to own their first home as soon as possible,’ he concluded.