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)