Mon, 07 Jul 2003

IBRA moves to manage property assets

M. Taufiqurrahman, The Jakarta Post, Jakarta

The Indonesian Bank Restructuring Agency (IBRA) plans to establish a holding company to manage its unsold property assets from earlier property asset sale programs (PPAP).

The move is considered necessary as IBRA is preparing for dissolution in late September and there are still a huge number of property assets surrendered by former bank owners that have not been absorbed by the market.

Currently, IBRA manages about 6,000 property assets including from plots of land, rice fields, houses, villas, shops, hotels, buildings, warehouses, apartments and factories throughout the country. The properties are valued at about Rp 9.8 trillion.

IBRA chairman Syarifuddin Temenggung said the establishment of the holding company was primarily intended to boost the sale prices of the assets. He said there was still no fixed design for the holding company, but it could be a joint venture.

Some analysts have said that the likely partner for the joint venture would be state-owned housing company (Perum Perumnas), which is keen on capitalizing on IBRA's assets to build low- income homes.

IBRA was founded in 1998 to restore the country's banking sector and retrieve state funds that had been extended to ailing banks.

The agency seized massive amounts of assets from banks, including property and collateral for loans, following their failure to repay funds that had been injected into the banking sector at the height of the 1990s financial crisis.

IBRA has sold some of its property assets through the PPAP-1 and PPAP-2, but the majority of the assets could not be absorbed by the market. The PPAP-1 program managed to sell about Rp 400 billion worth of assets, while the PPAP-2 program generated about Rp 600 billion.

PPAP-3 was recently launched but IBRA has not announced a revenue target. About 3,000 property assets will be offered in the program -- 1,500 unsold assets from PPAP-1 and PPAP-2 and 1,500 new assets. About 1,000 of the assets being presented do not come with proper ownership documents.

All of the assets are offered on an "as is" basis: the term used by IBRA to indicate the ownership documents of the assets may be incomplete, the assets may be in poor condition or they are occupied by third parties.

IBRA's insistence on selling assets on an "as is" basis has been blamed by many parties for the low amount of revenue generated from the property asset sales. The agency also is blamed for not providing incentives to buyers who likely still have to deal with problems pertaining to the legality of the property assets.

For assets with no legal documents of land certificates, for example, IBRA only provides a 10 percent discount.

IBRA, however, appears to be confident that the strategic location of the property assets will bring in the buyers. As far as problems regarding legal documents, IBRA said it was willing to provide assistance in processing the documents.

Robertus Bilitea, the head of IBRA's legal division, said that the agency, in cooperation with the National Land Agency (BPN), had set up an ad-hoc team to handle the processing of legal documents for property assets. IBRA hopes the ad-hoc team can speed up the process of obtaining land certificates.

Robertus said BPN had issued instructions to its officials to ease procedures for obtaining certificates for IBRA's property assets.

"If it takes a normal citizen up to one week to obtain a land certificate, IBRA will be able to get it in three day. And despite a lack of supporting documents, BPN can still issue a land certificate for certain plots of land," he said recently.

Analysts say support from the BPN will not rule out the possibility of disputes over land ownership, as there is no assurance that tenants will not challenge the legality of new certificates issued by the agency.

Given the myriad problems pertaining to legal documents, property analyst Panangian Simanungkalit of the Indonesia Property Study Center suggested that IBRA reduce its asking prices for the property assets in PPAP-3.

He said the cost of obtaining ownership documents should be included in determining the sale price of certain assets.

"Even for assets that have complete ownership documents IBRA should give a discount of around 30 to 40 percent to attract buyers, in view of the low interest in the previous PPAP-1 and PPAP-2," he said.

IBRA property sale programs

Units Value Proceeds

Part I 1,724 Rp 539 billion Rp 400 billion

Part II 1,898 Rp 1.98 trillion Rp 588 billion

Part III 3,000 Rp 2 trillion -