Mortgage facility needed to reduce investment risks<\/p>\n
JAKARTA (JP): Indonesia urgently needs to set up a secondary
\nmortgage facility (SMF) to minimize funding risks in the property
\nsector, which at present is solely financed by the short-term
\nfunds of financial institutions, a panel discussion concluded
\nyesterday.<\/p>\n
\"Long-term funds are increasingly needed to finance the
\nconstruction of houses, for which there has been a growing
\ndemand. We need the SMF to provide such funds,\" said Bank Papan
\nSejahtera's President Al Njoo, who was a panelist at the
\ndiscussion.<\/p>\n
He noted that it is very risky to finance property projects --
\nwhich are long-term investments -- with short-term funds. But
\nmost of the funds available here now are short-term.<\/p>\n
\"We are facing a mismatch here. On one side, most of banks'
\nfunds are short-term. However, on the other hand, the property
\nsector needs long-term investments,\" he noted.<\/p>\n
A. Edwin Kawilarang, the chairman of Real Estate Indonesia --
\nan association of Indonesian developers -- said that Indonesia
\nneeds one million houses per year. If the houses are priced at an
\naverage of Rp 10 million per unit, Indonesia needs a fund of Rp 1
\ntrillion per year.<\/p>\n
\"The amount is growing in line with the demand for houses,\" he
\nsaid.<\/p>\n
Edwin said that there were cases where developers were
\ncanceling or even halting their housing projects due to financing
\nproblems. \"As a result, many of them went bankrupt,\" he noted.<\/p>\n
He said that particularly now, as a result of the tight money
\npolicy imposed by the central bank, Bank Indonesia, and the
\ngovernment's effort to limit credits to the property sector,
\ndevelopers are facing a shortage of funds.<\/p>\n
\"I think we need to establish the secondary mortgage facility
\nas soon as possible to tackle the financing problem,\" said Edwin.<\/p>\n
State Minister of Public Housing Akbar Tandjung told the
\nmeeting that preparations for the establishment of the mortgage
\nfacility are now being finalized.<\/p>\n
He cited the conclusion of a study on house financing in
\nIndonesia in June 1993 by the Ministry of Finance in cooperation
\nwith the United States Agency for International Development that
\nthe main obstacle in financing property development is the
\nshortage of long-term funds.<\/p>\n
Dahlan M. Sutalaksana, an expert advisor to the minister of
\nfinance for the development of the capital market, said that
\nbasically the SMF is a reauctioning of property assets to
\ninvestors.<\/p>\n
According to Dahlan, developers will sell their property
\nassets to the would-be SMF, which will in turn issue and sell
\nbonds to investors through the capital market.<\/p>\n
He said that the SMF is different from the secondary mortgage
\nmarket (SMM) in the United States. The SMM buys and sells bonds
\nissued by financial institutions which will use the proceeds to
\nprovide property credits. The SMM is autonomous and bigger in
\nscope.<\/p>\n
The SMF, he said, is an initial development toward the
\nformation of the SMM.<\/p>\n
To accelerate the development of the SMF, the president of
\nBank Negara Indonesia, Widigdo Sukarman, noted that the
\ngovernment should tie up the banks' reserve requirements with
\ntheir purchases of the SMF's bonds.<\/p>\n
Currently, Bank Indonesia requires banks to put up 3 percent
\nof their deposits as compulsory reserves at the central bank.<\/p>\n
He said that the government should also give tax incentives to
\nthe SMF's bond buyers. \"Their earnings from the bonds should be
\ntaxed lower,\" he said.<\/p>\n
The one-day panel discussion -- led by the chairman of the
\nAssociation of Indonesian Economists, Marzuki Usman, and Susiyati
\nB. Hirawan of the Ministry of Finance -- was also addressed by
\nBank Indonesia's Monetary Supervision Chairman Harinowo, Erman
\nand Associates' managing director Erman Radjagukguk and the
\npresident of PT Pefindo (a rating company), Farid Harianto.(13)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/mortgage-facility-needed-to-reduce-investment-risks-1447893297",
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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