Builders told to subsidize customers

JAKARTA (JP): Indonesian Real Estate (REI), the association of real estate and housing developers, has called on members to subsidize their customers.

REI chairman Edwin Kawilarang said Wednesday the subsidy could be given by offering interest rates lower than what the banks charged.

"If the developers do not provide the subsidy, people will stop buying houses under the current tight monetary policy. As a result, developers will not be able to pay their loans to the banks," he said.

Edwin said with the current lending rates of 25 percent to 30 percent no one would buy houses and those who had bought one could not exercise their routine loan installment.

If this happened, housing developers would receive no money from their buyers to pay their loans, he said. "As a result, they could collapse," he added.

He said subsidizing the buyers would pose a financial problem to developers, but it would be better than a downfall.

The loss, he said, could be offset from their previous gains.

Bank Indonesia raised its key interest rates early last week to between 20 percent and 30 percent to stabilize the falling rupiah. Commercial banks also raised their deposit rates 20 percent to 30 percent. As a result, analysts estimated lending rates could reach between 24 percent and 35 percent as compared to 21 percent to 24 percent last month.

Subsidizing customers would only be a temporary measure, he said, because if developers were required to give a subsidy for a long time it would be detrimental to their businesses.

He therefore called on the government to ease the tight monetary policy as soon as possible. (aly)