Housing loan disbursement unjust

JAKARTA (JP): State Minister of Agrarian Affairs Soni Harsono said yesterday the fact that 70 percent of housing loans totaling Rp 28.2 trillion (US$12.8 billion) have gone for the purchase of upper class housing reflects injustice in the disbursement of credit.

Speaking at a seminar here yesterday on the role of the banking industry in the property business in 2000, the minister warned real estate developers they must pay more attention to the building of low-cost housing.

"It must be noted that the development of property cannot be seen from the business side only because land must be used for the best of the people's welfare," Soni said.

The minister called on real estate developers to concentrate on constructing low-cost apartments in big cities because 54 percent of the country's population will live in urban areas by the year 2000.

The director for general credit of Bank Indonesia, Widarto, said housing loans account for the third largest segment of credit disbursed at 15.2 percent of total bank lending, after industrial loans at 32.1 percent and trade with 22.5 percent.

Widarto said that the growth rate of loans for the housing sector declined to 2.4 percent in September from 4.5 percent in the previous month.

Total bank lending increased by 21.4 percent to Rp 170.84 trillion as of August from the end of last year.

Risks

Christianto Wibisono, director of the Indonesian Business Data Center, noted that expansion of credit for upper-class housing is a bit risky in the long run because the market is very artificial.

"People buying luxurious houses and apartments are mostly driven by speculation motives, not by primary demand," Christianto noted.

He predicted that there will be a 25 percent oversupply of upper class apartments in 1998, when 138 buildings with 35,000 apartment units will be offered.

"The business of property, especially condominiums, has been controlled by speculators, and I think a number of giant banks providing huge loans for real estate procurement will collapse in the coming years, just like what happened with Bank Summa," Christianto said. Bank Summa collapsed in 1992 due to its expansive lending to the housing sector.

Bank Indonesia (the central bank) Governor J. Soedradjad Djiwandono, when speaking at the annual congress of the Association of Indonesian Real Estate Developers (REI) earlier this week, warned banks to slow down their lending growth, especially to the housing sector, to prevent economic overheating.

REI's Chairman Enggartiasto Lukito yesterday hailed the governor's warning, describing such a reprimand as "precious transparency" on the part of the central bank in relation to real estate developers.

Enggartiasto called on banks to slant their lending toward the development of low-cost housing, which he said would reap benefit for all in the long run.

"If any such property turns out to be non-performing, I'll take it over and offer it to other developers. You can take my words as fact," he said at yesterday's seminar, which was attended mostly by bankers and real estate developers. (rid)

Editorial -- Page 4