50% REI developers have folded since 1997

50% REI developers have folded since 1997

The Jakarta Post, Jakarta

The Indonesian Developers Association (REI) said half of its
2,500 members had gone bankrupt since the 1997 economic crisis
crushed the property sector with sagging demand and a plunging
rupiah.

"The huge number of developers that have gone bankrupt or
ceased operations is the result of the economic crisis and the
lingering uncertainties on the repayment of small housing
mortgages," REI general chairman Yan Mogi was quoted as saying by
Antara on Wednesday in Padang, West Sumatra.

In Jakarta, he said, some 50 percent of developers had ceased
operations because of the economic crisis.

The 1997 crisis deprived much of the rupiah's value against
the U.S. dollar, and sapped the remaining demand for property at
that time.

Property sales began fading before the crisis hit, as
overinvestment in the sector during the early 1990s saturated
demand.

Also, many developers with foreign debts were unable to repay
them because of the weaker rupiah.

The double blow of sluggish property sales and soaring debts
in rupiah terms drove developers to near collapse with many
businesses folding, according to Yan.

He said that most of the fallen developers had been small and
medium-sized companies.

"This group of small and medium-sized enterprises (SMEs) are
vulnerable to outside changes and unfavorable conditions," Yan
said, adding that most REI members were SMEs.

His gloomy remark came just after PricewaterhouseCoopers (PwC)
released its first quarterly property report, which cited an
upturn in the sector.

It said several developers were pushing ahead with
construction projects, which signals that demand is on the rise.

PwC estimated that developments were underway in Jakarta's
suburbs and hinterland such as Bogor, Tangerang, Bekasi and
Cibubur.