Indonesian banks to take over debtor property assets
Indonesian banks to take over debtor property assets
JAKARTA (JP): Indonesian banks will soon become the reluctant
owners of trillions of rupiah worth of property assets, as
defaulting borrowers sidestep their obligations and forego their
ownership responsibilities, a property consultant says.
According to the Bank Advisory experts from Jones Lang Wootton
(JLW), the property sector has US$7 billion in outstanding debts
to Indonesian banks, according to central bank data.
This figure accounts for 14 percent of all outstanding loans
owed to the country's banks and excludes loans granted by foreign
banks to local property projects.
The banks' exposure to property was not only from direct loans
to property investors and developers, the company added. Many
loans to other sectors had been granted using property as
collateral.
Banks also own and lease a substantial number of properties
for offices and branch activities, it said.
JLW said the banks would have to provide management expertise
and working capital to maintain the value and income potential of
the properties, which have already lost a significant proportion
of their value since the loans were granted.
Banks typically do not have adequately skilled or experienced
personnel to deal with the day-to-day issues of managing and
rationalizing large property portfolios.
"Handling this type of task takes them away from their core
business," it said.
However, the banks might benefit from selling the properties
to foreign investors.
The director of JLW Asia and senior technical advisor in
Procon Indah, Ian David, said foreign investors were very
interested in taking over distressed bank's assets.
Procon Indah/JLW was recently appointed by several large
foreign fund managers to invest up to US$350 million in property
in Jakarta, David said.
"All that foreign investors are interested in at the moment is
talking to the banks, not the property owners," he said in a
statement issued yesterday.
The banks must aim to optimize the value of their assets over
a reasonable period of time rather than simply dumping their
properties onto the market, he added.
He said some properties could be sold off individually, but in
most cases the bank would gain more by pursuing strategic
partnerships and portfolio placements.
The main problem currently facing banks, however, was the
legal position regarding foreclosure.
Until laws in this area were clarified and implemented, people
would remain skeptical about the possibility of problems in this
area to be resolved in a direct manner, he added. (das)