Indonesia is needed  houses  more than 800,000 units per year just to accommodate new household formation the mortgage sector only finances at the most 200,000 of this demand and restricted to developer built residential schemes and high end residences. The production of houses is likely to be close to the national requirement for new housing. However, since house prices do not show signs of an overheated market and house price to income ratios and increases in house prices relative to the overall CPI are modest. Most new houses are built on an individual basis by contractors and households themselves and are financed from savings and if debt finance is used at all, it is in the form of short-term loans.

This type of mode of production has severe limitations in relation to the systematic provision of services and infrastructure when cities grow rapidly. A national housing survey  was conducted  in 2004 and it says that the great majority of houses were constructed on land owned by the home owner  and not all houses may have received formal building permits.

A 2004 national housing survey (BPS, 2004) showed that the great majority of houses were constructed on land owned by the home owner, even though not all houses may have received formal building permits. It is, therefore, not the lack of formal title to the land that hinders the expansion of mortgage lending as it was perceived to be in the past. There are, however, other reasons both having to do with low demand and constraints in supply. This study looks into the current context and structure of housing finance in Indonesia and proposes some actions for its expansion and the development of alternatives to mortgage finance.