Better property business predicted in 1997
JAKARTA (JP): The Indonesian Real Estate Developers Association predicted over the weekend that the property business would perform better next year, along with a higher per capita income and an expected decline in lending interest rates.
Association chairman Edwin Kawilarang, in reply to analysts who predicted a slump in the property business next year, said the association was still upbeat about the future.
He said growth would be seen especially in the development of small houses, apartments, condominiums and office buildings.
Analyst Panangian Simanungkalit and tycoon Ciputra recently predicted the property business would plunge and hundreds of small and medium developers would go bust as bad loans in the sector would increase.
Panangian predicted problem loans in the property sector would reach Rp 5.6 trillion (US$2.41 billion) up from Rp 5.25 trillion this year.
Edwin dismissed bad loans, saying they represented only 7.2 percent of the total loans channeled to the property sector.
"That means 93 percent of property business loans have performed well. Why do people make a great fuss about the small percentage of bad loans?" he asked.
Edwin based his optimism on further expected growth in the country's Gross Domestic Product next year.
The public's purchasing power would increase as the economy was projected to grow 7 percent and the industry and trade sector 12 percent, he said.
High interest rates would result in a slump in the property market, Edwin said. But he believed the country's banks would not increase interest rates as inflation had declined in the past 11 months and some banks had lowered their lending rates by 1 or 2 percentage points.
"The association hopes the monetary authority will encourage banks to lower lending rates to between 16 percent and 17 percent from above 20 percent at present," he said.
Edwin said expatriates, who have been recently allowed to buy property in the country, would become prospective buyers of luxury houses, condominiums and resorts next year, he said.
Edwin called on the government to issue guidelines of the regulation on foreigners buying property because without clear procedures, foreigners would be reluctant to buy houses.
Edwin said next year's property market would be dominated by small houses of less than 45 square meters.
He said association members had built 289,000 simple houses over the past two years and plan to build another 111,000 in the next two years.
The government targeted the association would build only 200,000 simple houses in the current Five-Year Development Plan.
Middle lower-class apartments and condominiums would also sell well next year, with 87 percent of the customers living in them and 13 percent leasing them out, Edwin said.
Following the current trend, office buildings would also increase despite fears of oversupply, he added.
He said office space had increased 21.5 percent to 2.37 million square meters this year from 1.95 million square meters last year. The occupancy rate rose to 86 percent in the third quarter of the year, from 84 percent the previous quarter.
The association would establish next year a multifinance firm with Bakrie Group to provide alternative credit to developers as well as prospective house buyers, he said.
The multifinance firm with a Rp 40 billion (US$16.9 million) paid-up capital would be between 25 percent and 40 percent owned by the association. (jsk)