Banks urged to favor cheap house developers

Banks urged to favor cheap house developers

JAKARTA (JP): Banks should not tighten lending to low-cost
house developers in need of financial facilities, the chairman of
developers' association said.

"If the banks indiscriminately limit their property credit,
we'll see some 50 percent of our developers going bankrupt,"
Edwin Kawilarang, the chairman of the Real Estate Indonesia,
which groups all Indonesian developers, announced yesterday.

Recently the government called on banks to limit property
loans, which reached Rp 41 trillion (US$17.45 billion) in October
last year. Analysts said property loans had reached a dangerous
level and could increase bad debts.

Speaking to reporters after meeting with Vice President Try
Sutrisno, Edwin noted yesterday that when the government imposed
a tight money policy in 1992, some 50 percent of the country's
developers -- mostly small and medium-scale developers -- went
bankrupt.

He suggested that restricting bank loans could interfere with
the government's program of building 240,000 low-cost houses
during the current Sixth Five Year Development Plan period, which
started in April 1994.

Edwin, who was accompanied by the association's vice chairmen,
Herman Soedarsono and Budiarsa Sastrawinata, and Secretary-
General Agusman Effendi, said that his association has asked the
government to cut the costs for building licenses of low-cost
houses, which account for 13 percent of their total costs.

"We asked the government to reduce or, if possible, to
eliminate such costs to keep the prices of low-cost houses low,"
he said, adding that in comparison the building license cost for
luxury houses is only 3 percent of their total costs.

Edwin asked that the government request private companies to
develop credit unions for housing deposits for their workers.

"The government has launched a housing deposit program for
civil servants and I think it would be good if private workers
also had such a facility," he said.

He urged the government to provide the public, particularly
land owners, with information on the possibility of owning shares
of a real estate company.

According to Edwin, selling land to real estate companies is
not the only alternative. Land owners can exchange their land
with shares in real estate companies.

During the meeting with the Vice President, Edwin reported the
result of his association's national meeting last December. He
also reported the plan of the United Nations to organize a
housing and settlement conference in Turkey this year.

He told the Vice President that Indonesia planned to host an
international real estate conference in 1998. (13)