Developers told to use loans prudently

JAKARTA (JP): Bank Indonesia Governor J. Soedradjad Djiwandono has warned property developers to use their bank loans prudently to avoid exposing the country's banks to liquidity risks.

Speaking at the association of Indonesian property developers' national congress on Monday, Soedradjad warned property developers not to use bank loans for speculation.

"The property industry is vulnerable to market and liquidity risks," he said, adding that if property businesses failed it could pose serious problems to the overall banking industry.

Soedradjad said that bank lending to the property sector was growing too fast, reaching 26 percent in the first nine months of this year, compared to 23.5 percent in 1995.

The growth in bank credits to real estate developers reached 33 percent in the January-September period, while loans for construction and home ownership grew 30 percent and 14 percent, respectively. Overall lending growth for the period was 16 percent.

Credit growth in the manufacturing sector was 5.7 percent in the period, while growth for trade, services and hotel sectors was 20.6 percent.

Soedradjad said many Japanese banks suffered serious financial problems in the early 1990's because of overzealous lending to the property sector.

Excessive lending to the property sector does not only expose the country's banks to financial risks but also causes strong inflationary pressures, the central bank governor said.

The chairman of the property developers' association, Edwin Kawilarang, appealed to the country's property developers to build more houses for poor people.

The association's members can cooperate with industries or government institutions in building low-cost housing, he said.

Minister of Cooperatives and Small Enterprises Subiakto Tjakrawerdaya said his office was ready to help, saying that it was his ministry's program to provide low-cost housing.

State Minister for Housing Affairs Akbar Tanjung said at the congress that the government had set a target to build 500,000 units of low-cost housings in the sixth five-year development plan, which will end in 1999.

He said he hoped the association's members would be able to build 300,000 units from the overall target.

According to Akbar, at least 377,000 units had been built across the country. (02)