Skyrocketing rates hit developers<\/p>\n
JAKARTA (JP): About half of the 2,400 housing developers in
\nIndonesia have stopped activities because of skyrocketing lending
\nrates due to the ongoing currency crisis, a minister said
\nyesterday.<\/p>\n
State Minister of Public Housing Akbar Tandjung said the
\ngovernment would fail to reach its target of building 500,000
\nlow-cost houses, under an ongoing five-year national development
\nprogram which ends in 1999, if the monetary situation does not
\nrecover soon.<\/p>\n
\"The situation is so severe that developers can not pay their
\ncontractors and as a result, contractors can't even afford to pay
\ntheir workers,\" Tandjung said after meeting with President
\nSoeharto at Merdeka Palace yesterday.<\/p>\n
Higher interest rates, increasing from about 18 percent to 30
\npercent in the last three months, had also reduced consumers'
\npurchasing power, especially middle and lower class people, the
\nminister said.<\/p>\n
Tandjung said most of the developers engaged in the
\nconstruction of low-cost housing depended heavily on bank loans
\nto finance their business, especially state-owned PT Bank
\nTabungan Negara (BTN).<\/p>\n
BTN specializes in financing middle and low-cost housing
\nprojects.<\/p>\n
Before the crisis, lending rates for low-cost housing ranged
\nfrom 11 percent to 14 percent while for the cheapest housing
\nconstruction the rate was only 8.5 percent, Tandjung said.<\/p>\n
The minister said the situation was further worsened by the
\nrising cost of construction materials and liquidity scarcity.<\/p>\n
\"The President ordered me to coordinate with related ministers
\nand the central bank to find ways to improve liquidity for the
\nhousing sector,\" Tandjung said.<\/p>\n
Tandjung hoped that fellow cabinet ministers would be able to
\nfind a way out of the crisis.<\/p>\n
\"But we are in a difficult situation, because we can not force
\nbanks to lower their lending rates,\" he said.<\/p>\n
The rupiah has depreciated about 35 percent against the
\nAmerican dollar since July.<\/p>\n
The government was forced last month to postpone or review 156
\ngovernment and state-related projects worth Rp 111.18 trillion
\n(US$38 billion) as part of a retrenchment measure to cope with
\nthe rupiah's sharp depreciation.<\/p>\n
According to the market outlook of PT Procon Indah and Jones
\nLang Wootton, Indonesia's property sector will continue to suffer
\nthe effects of the currency crisis for the next two years, as
\nlower demand will slow down the market.<\/p>\n
\"The erosion of wealth caused by the financial turmoil has
\nreduced consumers' purchasing power and forced property buyers to
\ncurb acquisition and expansion plans,\" said its executive Phil
\nSimpson recently. (prb)<\/p>",
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