Hundreds of small and middle developers on brink of collapse
Hundreds of small and middle developers on brink of collapse
JAKARTA (JP): Hundreds of small and medium-scale housing
developers are on the brink of collapse due to the credit crunch
stemming from the government's monetary policies, according to
the Association of Real Estate Developers (REI).
REI chairman Edwin Kawilarang said yesterday the government's
tight monetary policy, which has caused lending rates to
skyrocket, has put most property projects on hold due to low
demand and the rise in financing costs.
He, however, refused to disclose the real number of the
property and housing developers which have already fallen into
bankruptcy.
"But for your information, at least 789 of the association's
members are no longer active," he told Commission IV of the House
of Representatives in a hearing.
The association's active members consist of only 1660
companies at present or only 68 percent of the total active
members from last year, he said.
He noted the association's Jakarta, West Java and East Java
branches lost over 100 members each, followed by Central Java's
branch which lost 62 members and South Sulawesi's which lost 55
members.
"But not all the inactive companies are bankrupt. Some of them
may not be registering themselves as REI members because they
have finished their projects and are inactive now," he said.
He said the sluggishness in the real estate industry also has
driven over 192,000 construction workers into unemployment.
Edwin said the tight monetary measure, which prompted an
increase in deposit rates to over 25 percent and lending rates to
above 30 percent per annum in July was a real blow to property
and housing developers.
He acknowledged that interest rates had started to decline but
the downward trend in the bank rates did not mean that the
financial difficulty was over.
Edwin said that the monetary authority's policy to further
curb the increase in bank lending in the property sector would
remain a major problem in the future.
"It is a pity ... the government should not be too suspicious
of the property sector because the growth in the property
industry would also prop up other businesses," he said.
He said the association also asked the government to delay the
implementation of Law No. 21/1997 on land ownership fees until
Jan. 1, 1999.
The law, which will be imposed starting Jan. 1, states that
any change of land and building ownership worth over Rp 30
million, would be subject to a five percent tax.
Edwin said the tax would increase developers' costs, which
drove them to increase their product prices.
"At the end, the tax would be burdensome to consumers since
they would be forced to buy property at higher prices," he said
adding that the postponement of the law's implementation was
necessary for developers to help restore ailing property
businesses.
At yesterday's hearing, the association also said it has built
over 363,000 units of low-cost houses as of October, above the
initial target of 300,000 units this year. (08)
JAKARTA (JP): Hundreds of small and medium-scale housing
developers are on the brink of collapse due to the credit crunch
stemming from the government's monetary policies, according to
the Association of Real Estate Developers (REI).
REI chairman Edwin Kawilarang said yesterday the government's
tight monetary policy, which has caused lending rates to
skyrocket, has put most property projects on hold due to low
demand and the rise in financing costs.
He, however, refused to disclose the real number of the
property and housing developers which have already fallen into
bankruptcy.
"But for your information, at least 789 of the association's
members are no longer active," he told Commission IV of the House
of Representatives in a hearing.
The association's active members consist of only 1660
companies at present or only 68 percent of the total active
members from last year, he said.
He noted the association's Jakarta, West Java and East Java
branches lost over 100 members each, followed by Central Java's
branch which lost 62 members and South Sulawesi's which lost 55
members.
"But not all the inactive companies are bankrupt. Some of them
may not be registering themselves as REI members because they
have finished their projects and are inactive now," he said.
He said the sluggishness in the real estate industry also has
driven over 192,000 construction workers into unemployment.
Edwin said the tight monetary measure, which prompted an
increase in deposit rates to over 25 percent and lending rates to
above 30 percent per annum in July was a real blow to property
and housing developers.
He acknowledged that interest rates had started to decline but
the downward trend in the bank rates did not mean that the
financial difficulty was over.
Edwin said that the monetary authority's policy to further
curb the increase in bank lending in the property sector would
remain a major problem in the future.
"It is a pity ... the government should not be too suspicious
of the property sector because the growth in the property
industry would also prop up other businesses," he said.
He said the association also asked the government to delay the
implementation of Law No. 21/1997 on land ownership fees until
Jan. 1, 1999.
The law, which will be imposed starting Jan. 1, states that
any change of land and building ownership worth over Rp 30
million, would be subject to a five percent tax.
Edwin said the tax would increase developers' costs, which
drove them to increase their product prices.
"At the end, the tax would be burdensome to consumers since
they would be forced to buy property at higher prices," he said
adding that the postponement of the law's implementation was
necessary for developers to help restore ailing property
businesses.
At yesterday's hearing, the association also said it has built
over 363,000 units of low-cost houses as of October, above the
initial target of 300,000 units this year. (08)