Most high-rise building owners 'in fiscal trouble'

JAKARTA (JP): The majority of building owners in Jakarta's central business district cannot keep up with their bank loan repayments, property analyst Panangian Simanungkalit said yesterday.

Panangian, president of the Center of Indonesian Property Studies, said 80 percent of the high-rise buildings in Jakarta's "golden triangle" central business district had been developed with financing from 47 local banks.

The banks were currently experiencing financial troubles due to their huge nonperforming loans to the property sector, mostly to owners of high-rise buildings in the business district, he said.

"Sooner or later, the owners of the high rise-buildings in Jakarta's central business district will have to sell their properties to pay their loans."

Panangian valued the financially troubled high-rise buildings, excluding hotels, in Jakarta's golden triangle at US$21.85 billion.

He noted that many foreign investors from the United States, Hong Kong, Taiwan, the Middle East and Germany had expressed an interest in buying property in Jakarta's business district, but none of them had thus far bought any buildings because the owners valued their properties too highly.

"The owners are marking up the prices," Panangian said.

Panangian also criticized the government for its hesitation to sell the properties it confiscated from the 23 closed and suspended banks.

Last November the government closed 16 private insolvent banks and earlier this month suspended the operation of seven other ailing banks.

He said it would be better for the government to sell the properties now when Indonesian properties were still valued relatively highly by foreign investors.

Prices could drop, he warned, once the government issued a bankruptcy law. This would make many developers officially bankrupt and force them to sell their properties at whatever price they could get.

The country's property market was also experiencing an oversupply which would subdue prices, he added. (jsk)