From Savings to Shelter: The Role of Pension Funds in Housing Development in Indonesia

UN-Habitat (United Nations Human Settlements Programme) reminds us that housing solutions for informal settlements are not just about buildings, but about people, dignity, and long-term change (source: UN-Habitat). Their approach highlights several principles:

  • Upgrade where people live: Improve basic services like roads, water, and sanitation without displacing residents. Communities stay together, and their right to remain is respected.
  • Give people legal security: When families know they won’t be evicted, they invest in their homes and neighbourhoods, making communities safer and more resilient. Tools such as land titling and gradual formalisation make this possible.
  • Let communities lead: Planning with residents rather than for them ensures solutions are trusted, practical, and sustainable.
  • Offer real housing alternatives: Relocation, when necessary, must be voluntary and should provide affordable homes nearby, so culture and kinship ties remain intact.
  • Build with nature: Green infrastructure, flood defences, and open spaces protect homes from climate risks and improve everyday living.
  • Finance that works for everyone: Microloans, savings schemes, and public funding empower residents to improve housing and strengthen resilience together.
  • Make policy part of the solution: Integrating upgrading programmes into national housing and climate agendas ensures that informal areas are not sidelined.
  • Use data that reflects real lives: When residents are part of gathering and monitoring data, interventions are more accurate and progress more transparent.



While all these principles are crucial, one persistent challenge is funding. 

In many developing countries, housing budgets are limited and governments struggle to explore alternative financing options.

This is where our study contributes. In our paper, Pension Funds for Housing Development in Indonesia: Challenges and Strategies, published in Economics and Finance in Indonesia, co-authored with Anggari Marya Kresnowati (Universitas Islam Negeri Sunan Kalijaga) and Ayu Dwidyah Rini (Universitas Trilogi), we explored pension funds as a potential financial source for housing development in Indonesia.


Source: Soseco, T., Kresnowati, A.M., Rini, A.D. (2025). Pension Funds for Housing Development in Indonesia: Challenges and Strategies. Economics and Finance in Indonesia. 71(1): 31–47. https://scholarhub.ui.ac.id/efi/vol71/iss1/3


Despite Indonesia’s economic progress, safe and decent housing remains out of reach for millions. At the same time, pension funds are still largely confined to conventional investments and rarely channelled into housing infrastructure. Using Input–Output analysis of Indonesia’s national accounts, our study shows the scale of contribution pension resources could make if directed towards housing. The findings suggest that pension assets could become a decisive force in expanding housing supply, provided that policy and institutional barriers are addressed.

To unlock this potential, we propose two key strategies:

First, broaden pension inclusion: Expand participation in pension schemes to include informal workers and small entrepreneurs, enlarging the pool of available funds.

Second, redirect policy frameworks: Align pension fund investment mandates with housing development, while creating incentives and regulatory support for pension funds to flow into housing projects.

By doing so, idle pension capital can be transformed into tangible outcomes helping Indonesia move closer to the vision set out by UN-Habitat: inclusive, dignified, and sustainable housing for all (TS).

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