Housing sector is predicted to increase by 12% this year

Sari P. Setiogi, The Jakarta Post, Jakarta

The housing sector in the country is predicted to grow by 12 percent this year, with 130,000 houses estimated to be sold on the market, according to an expert.

"Last year, about 115,000 units were sold, as compared to 98,000 units in 2001. This year, the most demand will be for houses in the medium price range, from Rp 150 million (US$16,000) and up," director of the Indonesian Property Study Center (PSPI) Panangian Simanungkalit told The Jakarta Post on Monday.

He did not express optimism about low-cost housing projects, explaining that the government was not serious in providing subsidies.

"Last year, the government set a target to provide Rp 250 billion in subsidies to help low-income people purchase low-cost houses, but the target was not reached. This year, its target is about Rp 30 billion," he said.

According to him, the developing areas for housing are in Serpong and Karawaci in Tangerang, West Bekasi, Cibubur and Cileungsi and areas close to toll road gates in Bogor.

"The most rapid development is occurring in areas between Cibubur and Cileungsi," added Panangian, who is also the property consultant for Indonesian Bank Restructuring Agency (BPPN).

"The property business is now glowing, particularly for the middle to lower cost segment, like shop houses which fit the need of small and medium enterprises, or retail outlets at malls."

He even stated that it was now the right time to be involved in the property business. "While bank interest rates are declining and inflation is high, the capital which flew out of the country at the start of the economic crisis is currently returning and is targeted at the property business," he said.

But he acknowledged that high-end properties were no longer attractive. "Office buildings, industrial sites and luxury apartments are now losing their appeal. Most property segments that usually rely on foreign investment are now hard to develop," he said.

In the meantime, commenting on the possibility of over-supply in retail property business, Panangian said that many retail buildings had been and were being constructed and an over-supply might happen in 2005. The additional supply would only cause a price adjustment, which was both natural and positive, according to him.

He did not agree that in spite of a possible over-supply, retail buildings would not be empty.

"Most Indonesians still shop at traditional markets. The ratio of people compared to shopping center areas is still very small," he said. Panangian claimed that in Greater Jakarta alone there are 32 million citizens, while shopping centers cover only about 2.2 million square meters.

He was optimistic that the number of people shopping at malls and other shopping centers would keep increasing.