Developers told to use loans prudently

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)