Key to success: Understanding consumers' needs<\/p>\n
Satyasuryawan, Contributor, Jakarta<\/p>\n
One no longer hears the rumbling sounds of trucks used for
\ncarrying soil. Neither does one see the large crowd of workers.
\nHectares of fresh, red land lie empty and deserted except for
\nwild, untended scrub and tall grass. The surrounding roads are
\nbadly damaged with no sign of repair work in sight.<\/p>\n
This is today's sad picture of an area in Cibinong, Bogor,
\nwhich was originally prepared for 200 houses planned to be set in
\nscenic and serene surroundings.<\/p>\n
Some 60 developers in Depok -- about seven kilometers from
\nCibinong -- have also suffered a similar tragic fate. Some of
\nthem stopped work just shortly after the initial stages of their
\nprojects. The rest abandoned their sites, leaving them dotted
\nwith unfinished houses. This catastrophic situation is caused by
\nnothing else than the economic crisis. Prices of building
\nmaterials have skyrocketed due to the inflation. High interest
\nrates and the banking crisis have also made it extremely
\ndifficult for developers to obtain loans from banks. Consumers'
\npurchasing power has dwindled as well. Developers of upper and
\nlower-middle income residential estates are mostly falling apart
\nand the remaining few are lying low until there are some signs of
\nimprovement in the economy.<\/p>\n
Among the few survivors is PT Karka Yasa Profilia Plc. One of
\nits successful projects is the modest and low cost residential
\nestate Griya Yasa Lestari located in the Bojong Gede area. The
\ncompany, with its head office in Solo, Central Java, is also
\nconsidered a reputable blue chip on the Jakarta Stock Exchange.
\nIn 2000, Karka's sales went up by 350 percent and again by 250
\npercent in 2001. These tremendous achievements were highly
\ncommended by Investor magazine, which cited the company as the
\nbest share issuer in the property business in 2002.<\/p>\n
Even among developers of low cost housing, only a small number
\nhave managed to stay in business through the entire economic
\ncrisis. Most of them are on their death beds in the "emergency
\nroom" of the Indonesian Bank Restructuring Agency, unable to pay
\nback or even make installment payments on loans from banks. Some
\nof their assets have been auctioned off by the Agency and some
\nhave been taken over by larger and healthier developers, who are
\nable to weather the stormy conditions due to their sufficient
\nliquidity. In a situation like today's, getting loans or other
\nfacilities from the banks is just wishful thinking as the strict
\nsupervision applied by the Central Bank makes it more difficult
\nfor banks to provide loans for property businesses.<\/p>\n
Good luck or the hand of fate aside, PT Karka Yasa Profilia,
\nwhich is managed by young professionals, very much relies on one
\nunique and proven marketing strategy. It is simply a deep and
\ncomprehensive understanding of the property business, which
\nnaturally includes consumer behavior and the entire nitty-gritty
\nof the financial market. With their current track record, no one
\nis underestimating Karka's prestigious achievements to date.<\/p>\n
Developers of modest and low-cost houses realize that the
\nprofit margin in this business is small. Therefore when an
\neconomic crisis forced large developers to sell their houses at
\nmuch reduced prices, many smaller-scale developers followed suit
\nbut, unfortunately, found they could no longer survive in the
\nbusiness. They used up their small profit margins to cover
\nworking capital and the discounts.<\/p>\n
Karka, however, has refrained from selling its houses at
\nreduced prices. Although price is an important factor to consider
\nfor consumers in this segment of the market, aside from the
\nlocation, the quality and the design, Karka has gone against the
\ntrend by raising its prices. Still, it provides facilities for
\nbuyers in the way the down payment is made.<\/p>\n
This price-raising policy is based on the company's
\nunderstanding of the needs and the behavior of the buyers of low-
\ncost houses.<\/p>\n
People in the middle-to-low income brackets actually have the
\ncapacity to own a house but their purchasing power has never been
\ntapped. "Their problem is not paying the installments but rather
\nmaking the down payment. Therefore we try to help them by trying
\nto find loans for this down payment, for example from the
\nWorkers' Social Security funds," said Dwi Bagus Handhoko,
\npresident director of Karka Yasa Profilia.<\/p>\n
Karka also prefers banks offering commercial home loans rather
\nthan those providing subsidized home loans because in the case of
\nthe former the down payment is more affordable and can be paid
\nafter the house is occupied. In other home loans, the down
\npayment must be paid after the loan agreement has been signed.<\/p>\n
To be able to compete with other developers, PT Karka Yasa
\nProfilia also offers modest houses with more modern designs to
\navoid giving the impression of cheapness. The infrastructural
\nfacilities are like those of an upmarket estate, with broad roads
\nand wider alleys. Although the price is Rp 500,000 more
\nexpensive, the buyers do not object to this arrangement and opt
\nfor these better-quality Karka-designed houses. The houses it
\nsells do not just meet functional requirement but are also
\nadjusted to the need of the consumers as more support facilities
\nare provided such as parks, houses of worship house and sports
\nhalls.<\/p>\n
Logically, every developer could adopt Karka's trick. However,
\nmany developers of cheap houses fail to realize the looming
\ndanger.<\/p>\n
As referred to earlier, the profit from selling a low-cost
\nhouse is very small. That's why the property business in this
\nmarket segment is vulnerable to the investment waiting period and
\nthe huge cost of promotion. If the company has a big capital, it
\nis always all right to promote its houses during, for example,
\nthe grand real estate exhibition held annually in the Senayan
\nConvention Hall. Idle land, also, won't trouble the coffers of
\nthe company as profits may come from other projects.<\/p>\n
For small-scale developers, however, the problem of idle land,
\nfor example, can easily turn into a big blow. If the houses
\ncannot find buyers and promotion is not financially possible, the
\ncompany may go bankrupt. It must continue paying back its loans
\nto the bank or else the land or other assets will be confiscated.<\/p>\n
Karka overcomes the problem of idle land by cooperating with
\ncompanies building houses for their employees. Many companies
\nhave entrusted Karka with such projects based on their lower
\nprices, strategic location and payment system that matches the
\nbuyers' purchasing power.<\/p>\n
Karka has cooperated with PT Pos Indonesia for the
\nconstruction of 150 houses for the latter's employees. It has
\nalso teamed up with PT Argo Pantes, PT Dynaplast and Shangri-La
\nhotel for the same purpose. Cooperation has also been established
\nwith government agencies such as South Jakarta regional
\nadministration, the Ministry of Finance and Army headquarters for
\nthe construction of their respective employees' houses.<\/p>\n
By adopting this method of marketing, the developer has
\nsuccessfully gained a captive market. Contractors and
\nconstruction material suppliers readily do business with Karka as
\nthey are sure that Karka has its buyers and that payments will be
\nmade in a shorter period time. Similarly, the banks also trust
\nthe company and extend loans to it. This method has also
\nsuccessfully overcome the problem of land availability usually
\nfaced by small developers. Sometimes a company planning to build
\nhouses for its employees has got its own land plot or has a piece
\nof land close to land that Karka manages.<\/p>\n
The Plaza Semanggi project in the former Graha Purna Yudha
\nbuilding, which is being developed by the Agung Podomoro Group,
\nalso marks a synergy between buyers' demands and the objective of
\ndevelopers. Of course, a bank cannot just easily extend loans for
\nthis Rp 300-billion project. However, under the built-operate-
\ntransfer (BOT) system, PT Primatama Nusa Indah, the subsidiary of
\nAgung Podomoro that is developing Plaza Semanggi, has established
\nsynergies with three other investors: PIKKO for financing and
\ncapital, ProLease Asset Management for property marketing and
\nland leasing and Hari Darmawan Corp. for merchant\/tenant affairs.
\nThe four of them have closely interrelated businesses.<\/p>\n
Synergy and integration in property marketing, as shown above,
\nwill ensure the survival of this business and greater
\nprofitability on the part of the companies involved.<\/p>",
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