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REI secretary-general Yan Mogi said on Saturday that most real estate developers were no longer active because doing business was no longer economically viable owing to high interest rates on loans.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