Developers asked to pay fee for cheap apartments

Developers asked to pay fee for cheap apartments

JAKARTA (JP): The city administration has decided that real
estate developers will no longer be obliged to build low-cost
apartments in the city, but instead will be required to pay a
percentage of the value of their housing projects to the
administration.

Under this scheme, the administration will build the
apartments instead of the developers.

The assistant to the city secretary, Prawoto Danoemihardjo,
said yesterday that the decision was made in an effort to boost
the development of low-cost apartments because many developers
appear reluctant to build low-cost apartments as required by the
administration.

The step was taken after the administration failed to enforce
Gubernatorial Decree No.540/1990 which required housing
developers to build low-cost apartments in Jakarta.

Under the decree, private developers were required to provide
20 percent of their commercial sites for the building of low-cost
apartments.

However, only four of 70 developers have complied with the
regulation to date.

"The administration has decided to accept funds from the
developers in compensation for their obligation. But we are still
assessing the percentage of funds to be paid," Prawoto said.

He refused to name the percentage, saying it should be
reported to the governor first.

A source at the city administration who refused to be named
said that developers will be required to pay six percent or seven
percent of the value of their projects to the administration.

"A whole project consists of the cost of the land for the
project according to the tax office plus the total cost of the
project," the source said.

The source said the percentage should be reviewed because the
Indonesian Real Estate Association has objected to the
percentage, proposing that it should not be over five percent.

Percentage

The chairman of the Jakarta branch of the association, Nugroho
Suksmanto, said during a meeting with the Minister of Housing
Affairs Akbar Tandjung and officials of the city administration
yesterday that the association could only afford to pay a five
percent fee.

"We cannot provide more than five percent of the total price
of the land according to the tax office," he said.

Nugroho said developers in Jakarta control 415.382 hectares of
land worth Rp 2 trillion (US$869.56 million) and the association
predicted that it can collect Rp 100 billion from its members to
help the administration build 15,000 low-cost apartments over a
period of five years.

He explained that the administration will need at least 36
hectares of land to build the apartments and the total cost for
land appropriation is estimated at Rp 70 billion.

The city housing agency estimates that every year the city
needs 70,000 homes, 30 percent of which should be apartments,
including low-cost apartments and condominiums, due to land
shortage in the city.

Fifty percent of the demand for apartments is fulfilled by
private developers who build luxurious apartments for the middle
and upper classes, while low-cost apartments are built by the
city administration.

However, due to financial problems the city administration can
only afford to build 3,150 low-cost apartments per year, or 30
percent of the demand of 10,500 apartments per year.(yns)