Property sector 'needs foreign investment'

Property sector 'needs foreign investment'

JAKARTA (JP): The property market needs foreign investors with
fresh capital to pay debts, release existing owners from
unprofitable properties and restructure the sector, a property
analyst said.

Greg Penn, technical advisor to Procon Indah and director of
Jones Lang Wootton Asia, said it was crucial for Indonesia's
recovery to allow a higher level of direct foreign ownership in
the property market and streamline the process of establishing
both joint-venture companies and wholly foreign-owned interests.

"An additional burden of new property taxes would make
Indonesia less attractive for investment than neighboring
countries such as Thailand and Malaysia," he said yesterday.

Penn said he was certain that people expecting the property
market to improve in the short term were ill-informed.

"This market will not attract speculators but rather long term
investors who have the capacity to ride out the current downturn
and be rewarded for their patience with capital and income growth
beyond the year 2000," Penn said.

He added that foreign investors would be interested in
reentering the property market when the country's political
situation stabilizes. Prior to that, investment should be for
lower levels of exposure in the US$5 million to $10 million
equity levels.

"Property is attractive to major foreign investors because
they can control and manage the investment. If they invest in
public companies, they often have no influence in critical
financial and ownership decisions," he said.

Direct property investment would allow majority ownership,
providing control to the investor, Penn added.

Relocation

Procon said some owners and renters were currently considering
relocating their offices into the more established and secure
area of the capital's business district.

The capital's business district comprises Jl. Jendral
Sudirman, Jl. HR Rasuna Said and the area between the two streets
in South Jakarta.

The company has analyzed some of the recent riot damage to
property, infrastructure, transportation and communications,
concluding that it had a devastating impact on people's
businesses and their daily existence.

It said that businesses affected by the riots were questioning
whether they should reestablish themselves at their old site or
move to a high-rise office building or a retail shopping mall
offering security and supporting services.

Occupants of larger complexes are now open again for business
while many businesses in small offices and shop/houses may not be
able to open for months, it said.

"The devastation, loss of property and business and the threat
to personal safety are likely to influence the type of
developments in the future. In the short term, there may be an
unforeseen gain in shopping malls and high-rise office
buildings," Penn said.

He said the property market slump provided opportunities to
purchase secure offices and to lease space in shopping malls at
lower prices.

"Large office buildings and shopping malls have professional
security along with the infrastructure required to operate a
business. This may be more expensive than a small shop/house, but
compared to the loss of business and capital experienced recently
the difference in cost is not significant," Penn said. (gis)