Developers complain about land brokerage

Developers complain about land brokerage

JAKARTA (JP): The association of real estate developers voiced
their complaints yesterday about land brokers who dictate their
prices to developers, whose business tend to suffer as a result.

"This has become a serious problem for the construction
business," chairman of Real Estate Indonesia (REI) Enggartiasto
Lukita told a hearing with Commission V of the House of
Representatives here.

Speculative actions, which are spreading all over the country,
could lead to a high-cost construction sector if no measures are
taken.

"Very often they forcibly ask developers to pay for the land
they control at their set prices. Such a practice tends to
protract the development process of public housing," he said.

President of Lippo Cikarang, Herman Latief, seconded the view,
saying that his company also faces speculators in land
clearances, including Lippo Cikarang, an industrial estate near
Bekasi which was visited by Commission members yesterday.

Reliable sources told The Jakarta Post that many developers
are facing similar problems in constructing their projects on
Java and other islands.

"They move very quickly. If there is a construction project in
an area, they will move and buy the land there from local
residents at very low prices. And then they sell it to developers
at very high prices," said a source.

They added that such tactics will not only harm developers but
also the public. Many of the land owners cannot get market prices
for their land.

Due to high land prices, developers have to sell the houses
they build at unusually high price levels.

REI, grouping 2,110 developers from all over the country, 900
of which are based in Jakarta, is facing a slump in the
construction business. The demand for houses is also weak.

More and more banks are reluctant to provide credits to the
property sector. "I think banks have now become choosy in giving
their credits to the property sector. They are likely to give
credits just for construction and not for land clearances," said
Herman.

Furthermore,the government has appealed to all banks to limit
their credit to the property sector.

Credit to the property sector has reportedly reached a warning
level and many of them could turn into problem loans. In 1993,
credit levels to the sector were at Rp 21.8 trillion (US$9.49
billion) but as of August 1995, the level had reached Rp 41
trillion.

Such problems are likely to be discussed at REI's national
conference from Dec. 11-14. (13)