33,000 hectares derelict in Greater Jakarta

JAKARTA (JP): About 33,000 hectares of land in Greater Jakarta is derelict because of poor law enforcement in the property sector, a property analyst said yesterday.

The chairman of the Center for Indonesian Property Study Panangian Simanungalit, said the land was abandoned because developers had bought more land for houses than they could develop.

"Developers have a capacity to build about 60,000 houses a year. For that capacity they need only 15,000 hectares of land. But they have cleared about 48,000 hectares, 33,000 hectares more than needed," he said.

Panangian said the amount of cleared land would increase because developers had already secured land acquisition permits for about 121,000 hectares in Greater Jakarta.

This would rise even further if the government granted more land acquisition permits, he said.

The amount of land allocated for residential areas in Greater Jakarta is 180,000 hectares.

Panangian said the government decided last year to stop giving permits but last month changed the policy, saying small developers needed the permits, particularly to build simple houses.

He said if the amount of derelict land rose, the cost of holding land would increase. The land holding cost is mostly caused by interest on loans.

"This is the main cause of expensive house prices in Greater Jakarta," he said.

"If we presume the land price is Rp 25,000 (US$10.64) per meter than the 33,000-hectare derelict land is valued at Rp 8.25 trillion," he said.

The average price of land outside of Jakarta is about Rp 100,000 a meter.

He said if the Rp 8.25 trillion was 70 percent derived from bank loans then the developers had to pay at least Rp 1.16 trillion in interests at a rate of 20 percent a year.

"Due to the interest burden, developers have to raise their house prices by an average of Rp 15 million a unit every year," he said.

"Can you imagine that? The funds can actually be allocated to finance other businesses that could bring more advantages to our economy," he said.

Panangian was commenting on a statement made by the Minister of Agrarian Affairs, Soni Harsono, that a new system for taxing land was needed to prevent speculation and dereliction of land.

Soni said the current land taxation system encouraged speculation and dereliction of land because it was based only on the land's economic value.

"Many people want to buy land for speculation only, hoping that they can sell them for more later. Such buyers have no intention to build houses or use the land for economic activities," he said.

Panangian said the government should stop issuing land permits and reduce the amount of abandoned land by forcing developers to accelerate housing developments.

He said the government should also impose a progressive tax rate on land to discourage people neglecting land. (bnt)