Residents of Batu Aji district in Batam, Riau Islands, rallied Monday at the Batam Industrial Development Authority (BIDA) office to protest the protected forest status recently conferred on their land.
The protesters claim the new status has made it difficult for them to sell their land or put up their homes for mortgage.
Monday's rally involved 1,200 people from 28 neighborhood units in 20 housing complexes in Batu Aji, who began arriving at the BIDA office from 9 a.m. local time.
They also rallied at the Batam Legislative Council.
Rally coordinator and neighborhood chief Novrizal said residents had been placed at a disadvantage after buying homes that banks now refused to accept as collateral for loans on the grounds that the buildings were located in a protected forest.
"The housing developers have bailed out on us," he said.
"They were allocated the land parcels by the BIDA. We thus hold the BIDA responsible for this mess."
BIDA head Mustofa Wijaya and several of his staff met with representatives of the homeowners Monday in a close-door meeting.
Mustofa and BIDA spokesman Dwi Djoko Wiwoho sought the protesters' patience and understanding as they promised to look into the issue.
They also said the process of getting thousands of hectares of land named as a protected area was still being handled by an independent team at the Forestry Ministry.
"We call on residents to be patient as we are currently processing the change of status," Wiwoho said.
"We don't know when the process will be complete; it needs time."
The Batam branch of the Indonesian Real Estate Association (REI) estimates more than 20,000 houses, worth a combined Rp 2 trillion, have been built throughout the municipality on land of an uncertain status.
Batam REI chairman Mulia Pamadi told The Jakarta Post the problem stemmed from the National Land Agency's refusal to issue title deeds for the houses since they were located on land considered part of protected forest areas.