Developers want review of housing subsidy policy

JAKARTA (JP): Private developers are pressuring the administration to review its policy on low-cost apartment funding, saying that they can no longer subsidize the cost.

The assistant to the City Secretary, Prawoto Danoemihardjo, said Saturday that developers had urged the administration to concentrate on houses or apartments for people whose monthly salaries can support the purchase of apartments or houses.

To support the city's program to house slum dwellers, a Gubernatorial Decree No.540/1990 requires real estate developers to help building low-cost apartments.

The developers construct the apartments, but the prices of the apartments are set by the administration.

For example, an apartment unit priced at Rp 13 million (US$5,652), developers are asked to subsidize Rp 6.5 million.

This policy is meant to help poor people who want better housing.

However, due to various factors such as land and construction costs, only four out of 70 developers have fulfilled the requirement.

Given this reality, Prawoto said, last Wednesday the municipality decided that developers are now required to pay a percentage of the value of their housing projects to the administration.

The percentage is yet to be announced.

The developers' proposal to change the target market is "interesting", Prawoto said, because in reality many original owners of apartment units have sold or leased their units on.

But the Governor has not responded to the proposal, he added.

Earlier Yan Mogi, an executive of the city branch of the Indonesian Developers Association, REI, said rocketing land prices are the main problem.

Prawoto said developers have said they are willing to forgo profit from apartments, but are unwilling to continue subsidizing the program.

"By changing the target market to those with higher, stabler incomes the developers hope to be able to sell the units at higher prices, and thus at least cover construction costs," Prawoto said.

Prawoto argued that the sale or lease of low-cost units by the former slum dwellers is caused by high demand for the units. Former slum dwellers often say they won't be able to afford the installments in the long run.

"Many of the original owners have moved out of their apartments; and this shows that people with steady jobs who do not have homes yet are interested in the units," he said.

The total demand for low-cost apartments in the city is 10,500 units per year, yet each year the city administration is only able to build 3,150 units.

From 1985 to the present a total of 7,163 low-cost units have been built, ranging from 18 square meters to 54 square meters in width.

The municipality is still building more than 1,200 units, scheduled for completion by next year.(yns)