IBRA moves to manage property assets

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 -