Almost all real estate developers insolvent

Almost all real estate developers insolvent

JAKARTA (JP): About 95 percent of the country's housing
developers have gone bankrupt due to the continued slump in the
country's property sector, according to the Indonesian Real
Estate Developers Association (REI).

REI secretary-general Yan Mogi said on Saturday that most real
estate developers were no longer active because doing business
was no longer economically viable owing to high interest rates on
loans.

"Only between 5 to 10 percent of the association's 1,500
members across the country are still active," Yan said in the
West Nusatenggara capital of Mataram on the sidelines of a
congress of association members in the province.

Yan said REI members faced difficulty in selling property due
to high interest rates and the sharp price increase of
construction materials following the sharp depreciation of the
rupiah against the dollar.

Most members of the public cannot afford to buy houses due to
the rise in the prices of construction materials which has pushed
up house prices, he said.

Yan said developers should be given cheap loans with an
interest rate of between 16 percent and 18 percent per annum to
allow them to resume activities.

Lending rates are hovering between 35 percent and 40 percent
as a result of the government's tight monetary policy to curb
rising inflation and to stabilize the volatile rupiah.

"We have visited President B.J. Habibie twice to ask if it is
possible for developers to receive special credit packages such
as those given to small and medium-size businesses," Yan was
quoted by Antara as saying.

According to Yan, real estate developers, which are mostly
small and medium companies, deserve to receive cheap loans.

The government introduced last year cheap loans with interest
rates of between 8 percent and 16 percent for small companies and
cooperatives to help them cope with the crisis.

The association also asked for the President's help in dealing
with their debts, Yan said, adding that the association's
members, with debts of less than Rp 5 billion (about US$588,000)
should be allowed to reschedule their debts in a bid to ease
their financial burdens.

The housing sector is one of the sectors hardest hit by the
sharp depreciation of the rupiah. The rupiah, which was Rp 2,500
against the American greenback before the crisis hit the country
in the middle of last year, fell to its lowest of Rp 17,000 per
U.S. dollar in January, 1998. The rupiah has settled at between
Rp 8,000 and 9,000 against the U.S. dollar.

Yan said the association's members also deserved government
favor because most of them had catered to low-income people.

He said the association built 700,000 low-cost housing units
from 1994 through 1997, much more than the initial target of
500,000 homes.

Former REI chairman Edwin Kawilarang earlier said the property
sector's debts, including foreign debts, totaled Rp 70 trillion
as of May last year.

Property analyst Panangian Simanungkalit has blamed the
problems in the country's banking industry on massive investment
in the property sector. Many banks have failed to regain money
invested in the property sector. (jsk)