The Property Sector Plays a Significant Role in Reducing Poverty in Indonesia

property investment

The absorption of employment opportunities in the property sector is said to have a significant role in preventing poverty in Indonesia. According to a recent study by the Institute for Economic and Social Research (LPEM) at the Faculty of Economics and Business at the University of Indonesia (FEB UI) in 2023, the poverty rate will increase to 17.37 percent if this sector stops its activities.

The report also indicated that poverty levels in Indonesia currently stand at 9.54 percent of the total population of 274 million, which is roughly 26 million people.

If the property sector stops functioning, the poverty rate is predicted to increase up to 17.37 percent, meaning that it has the potential to rise to 47 million people.

Budiarsa Sastrawinata, the Head of the Integrated Property Development Agency, acknowledged that the property, real estate, and construction industries are significant contributors to both the central and regional government revenues, as well as providing considerable job opportunities for the workforce.

“The sector also contributes to the growth of the local economy in the vicinity of property developers and is a significant provider of employment opportunities and workforce absorption,” Budiarsa said in Jakarta on Monday (10/4/2023).

The property sector, including its multiplier effects during the 2018-2022 period, has generated central tax revenues of around IDR 185 trillion annually, or equivalent to 9.26 percent of the total tax revenue collected by the central government.

Meanwhile, for regional governments, the property sector and its multiplier effects have contributed to the creation of regional income (PAD) of around IDR 92 trillion annually, or equivalent to 31.86 percent of the total PAD revenue received by provincial and district/city governments.

“Considering the relatively high numbers, we hope that both the central and regional governments can empower the property industry as one of the leading industries with an increasingly conducive supply chain ecosystem,” he added.

In terms of employment, the property, real estate, and construction industries provide job opportunities for 13.8 million people annually, or equivalent to 9.6 percent of the national labor force in 2022 or 10.2 percent of the working population in 2022.

From the workers’ income perspective, the property, real estate, and construction sectors contribute around IDR 938 trillion to IDR 1,147 trillion per year.

Furthermore, Indonesian Coordinating Minister for Economic Affairs Airlangga Hartarto stated that the property industry is one of the leading sectors driving Indonesia’s economy. “Realization of property industry investments also ranked fourth, contributing IDR 109.4 trillion. However, there is a housing backlog in Indonesia, which is estimated at 12.71 million in 2021,” he explained.

Overall, the study’s findings highlight the crucial role that the property sector plays in the Indonesian economy, not only in generating revenue but also in providing employment opportunities and reducing poverty.

Therefore, it is necessary for the government to support and empower the property industry and its ecosystem to continue its contributions to the country’s economic growth and welfare.