Rapid property development may cause cash crisis<\/p>\n
JAKARTA (JP): The Association of Real Estate Indonesia
\nacknowledged yesterday that the extensive property development in
\nthe country may cause a crash crisis due to possible huge non-
\nperforming loans.<\/p>\n
"The growing demand for loans in the real estate sector, which
\nhas expanded at an unchecked pace, however, should have not been
\ngeneralized," the association's chairman, Enggartiasto Lukita,
\nsaid in a press conference yesterday.<\/p>\n
He said the association recommends that loans for the
\nestablishment of new golf courses, apartments and large-scale
\nproperty projects be controlled, but not loans for medium and
\nsmall-scale housing developments.<\/p>\n
Recent reports said that loans for the property business
\nreached some Rp 28.2 trillion (US$12.8 billion) as of October,
\nwhich accounts for 15 percent of the country's total loans.
\nAround 70 percent of the property loans was allocated for the
\ndevelopment of apartments and middle-class houses.<\/p>\n
Meanwhile, Bank Indonesia, the central bank, reported that
\ncommercial banks' total outstanding loans as of September reached
\nRp 174.28 trillion, 18 percent higher than Rp 147.34 trillion as
\nof last December.<\/p>\n
Enggar refused to specify the portions of loans for the
\ndevelopment of large, medium and small property projects. He just
\nsaid that credits for the construction of houses and real estates
\nincreased by 47 percent during the period between March 1993 and
\nMarch 1994.<\/p>\n
During the March-October period of this year, credits for the
\nconstruction of real estates alone expanded by 44.6 percent and
\nfor houses by 34.1 percent.<\/p>\n
Investment<\/p>\n
The property business has also attracted investors. Data from
\nthe Investment Coordinating Board show that during the first 10
\nmonths of this year, the board approved 19 property projects
\nworth Rp 2.82 trillion (US$1.28 billion) committed by domestic
\ninvestors and 12 other projects worth $645 million committed by
\nforeign joint ventures.<\/p>\n
In the January-October period, the board also approved Rp
\n721.3 billion in domestic investment commitments for office
\nbuilding development and $976 million in foreign investments.<\/p>\n
The total loan approvals in the March-October period reached
\nmore than Rp 9 trillion, of which Rp 3.2 trillion was allocated
\nfor real estate and Rp 3 trillion each for office and housing
\nfacilities.<\/p>\n
Enggar said that property still has good prospects in 1995,
\nespecially in residential and housing sectors as well as office
\nbuildings after seeing an oversupply in the last three years.<\/p>\n
He said that in the apartment business, there will be 73
\nprojects to be completed by 1997 which will supply 29,941 units,
\nwhich means a decrease in the occupancy rate of middle-class
\napartment blocks.<\/p>\n
There will also be 21 office buildings to be open by 1996,
\noffering 1,2227 square-meters of space in addition to eight other
\noffice buildings which will be sold through strata title. An
\noversupply of about 15 percent in the office space sector will be
\nlikely in 1997, he said.(icn)<\/p>",
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"sponsor": "Okusi Associates",
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