Property players to slow down expansion

Property players to slow down expansion

Anissa S. Febrina, The Jakarta Post, Jakarta

Setbacks in the domestic economy recently -- triggered by higher
key interest rates set by the central bank and higher fuel prices
-- have prompted property developers to slow down expansion,
focusing on this year's ongoing projects and reviewing next
year's plans.

"We are calming down after a massive expansion these past
couple of years. We will review our planned projects in
accordance with the economic situation," said Agung Podomoro
Group marketing director Indra W. Antono last week.

Concentrating on middle-upper class property developments in
the capital, Agung Podomoro Group is currently working on nine
projects, mostly commercial centers and apartments such
as the Jakarta City Center, Senayan City, The Pakubuwono
Residence and CBD Pluit.

Although the company had four more projects on its 2006 list,
Indra said, it was likely to be delayed as their current projects
are nearing completion and would add to next year's supply.

Established developer Ciputra, which choose to concentrate on
real estate, would continue expansion less aggressively than it
did this year, said Ciputra Surya director Harun Hajadi.

"We make fewer developments although the demand for housing is
still high," he said, adding that the company plans to invest
next year a slightly lower amount as compared to its Rp 400
billion investment in 2005. The company invested Rp 800 billion
in 2004.

This year, it is still completing its high-class resort
development of Taman Dayu in East Java and several middle-lower
compounds in Greater Jakarta.

The domestic property market has been experiencing a boom
since 2002 with market capitalization more than doubling from Rp
26.6 trillion (US$2.65 billion) to Rp 56.1 trillion as of
September 2005.

Property analyst Panangian Simanungkalit from the Center of
Indonesian Property Studies (CIPS) suggested that developers be
more careful and responsive in reading market demand.

With exchange rates fluctuating and the inflation rate
predicted to soar to 12 percent until the year-end, buying
property might be the safest way to invest nowadays, he added.

The value of upper class apartment units in prime locations
such as Jl. HR Rasuna Said, South Jakarta, and Jl. Jend.
Sudirman, Central Jakarta, for example, will grow by an average
of 20 percent annually. By comparison, the yearly interest of
savings and deposits sits at between 12 percent and 15 percent.

Panangian said 65 percent of upper class property ended up in
the hands of investors.

However, the highest demand would still be for housing in the
middle to lower market. Since the latter are experiencing
financing difficulties, Panangian suggested that developers
cooperate with the banking sector in providing longer lending
periods.

"It has been done in Thailand and Malaysia, it should be
feasible here," he said.