Developers advised to consolidate

Developers advised to consolidate

JAKARTA (JP): Real estate developers need to consolidate their
businesses to survive the current property slump caused by a
credit squeeze and weakening demand, a noted analyst said
yesterday.

"They have to adjust themselves to the changing market which
is witnessing increasingly tough competition due to the
decreasing demand. Total consolidation is a must for them,"
director of the Center for Indonesian Property Studies (CIPS),
Panangian Simanungkalit said.

He explained that developers should consolidate through
restructuring and repositioning of their businesses to succeed in
the changing market.

Panangian, who is also the chairman of Panangian Simanungkalit
& Associates, noted that unlike the last two years, this year and
next year will see the property market dominated by end-users.

In 1994 and 1995, the market was monopolized by speculative
buyers and individual investors who sought capital gains.

This year, speculative buyers and individual buyers are
preferring to deposit their money in banks and so they are
staying out of the property market.

The property business, Panangian said, is also experiencing an
increase in risks, so that developers are finding it difficult to
get funds from the capital and money markets.

Banks, which were urged last year called by Bank Indonesia,
the central bank, to limit their credits to developers, are now
reluctant to finance property projects. They already plan to cut
their credits for the property sector to Rp 5 trillion (US$2.3
billion) this year from Rp 10 trillion last year.(13)