New govt urged to build cheap houses

New govt urged to build cheap houses

Zakki P. Hakim, The Jakarta Post, Jakarta

The new government should make the property sector an engine for
economic growth, especially by encouraging developers to build
low-cost houses and apartments for low to middle-income people, a
leading property consultant said on Wednesday.

Director of the Center for Indonesian Property Studies (CIPS),
Panangian Simanungkalit, said that economic growth can be
accelerated by developing 500,000 units of low-cost houses and
50,000 middle-class apartments in big cities across the country
within the next five years.

"The projects could become an instrument to absorb
unemployment," he said during the launching of his book entitled,
"Is property business moving toward another crash?"

According to CIPS research, the property sector contributed up
to 51 percent to economic growth last year.

Panangian also said that developing low-cost housing would
make political sense for the new government.

Without sufficient supply of affordable housing facilities,
the government could potentially face social unrest, as currently
there was a growing trend that only "the haves" could purchase
houses, he said.

During the past five years, the government could only provide
around 200,000 units of low-cost houses, or an average of 40,000
units each year. In comparison, previous authoritarian president
Soeharto, built an average of 138,000 units each year from 1993
to 1998.

Panangian suggested the government provide fiscal incentives,
such as housing subsidy for the lower income people, and also
relax banking regulation to encourage banks to lend more money to
the property sector.

Elsewhere, Panangian said that building middle-class
apartments for young professionals in big cities, such as
Jakarta, could actually bring in a handsome profit as in
developing premium apartments.

According to CIPS research, the annual demand for apartments
in Jakarta alone is around 10,000 units priced between Rp 100
million (US$11,000) and Rp 200 million ($22,000) each.

"The figure excludes potential markets from other areas near
Jakarta, such as Bekasi, Depok and Tangerang," he said.

He said the return on investment (ROI) for the development of
middle-class apartments could reach as high as 35 percent, but on
the conditions that the government provides tax incentives for
developers, speed up licensing procedures, and a low interest
rate environment. But even without these conditions, developers
can still enjoy a healthy ROI of around 18 percent.