Real estate may grow by 9.4%

Real estate may grow by 9.4%

JAKARTA (JP): The growth of the real estate market will likely increase to 9.4 percent this year from eight percent last year, in spite of possible increases in banking lending rates, a business leader says.

"The growth will even go higher if the economic expansion can reach the government's target of 6.2 percent this year," Ciputra, chairman of the property business giant, Pembangunan Jaya Group, said here yesterday.

Speaking at the first conference of the Association of the Indonesian Real Estate Brokers (Arebi) at the Sahid Jaya Hotel, Ciputra said the high economic expansion will boost demand for property.

To anticipate the increasing demand, state-owned Bank Tabungan Negara plans to provide some Rp 900 billion (US$418 million) for mortgage operations, while privately-run banks are committed to providing Rp 500 billion for housing credits, he said. He added that the amount is 50 percent higher than that of last year.

"I am therefore of the opinion that the increase in the United States short-term interest rates would not significantly affect the growth of the property business in Indonesia," he said.

The increase of U.S. interest rates by 0.75 percent in the last few weeks has only pushed up Indonesian lending rates by around one percentage point.

The Federal Reserve last month raised short-term interest rates by 0.25 percent. This is the third time they have increased the rate this year. Some major U.S. banks have reportedly followed suit by lifting their prime rates.

"As long as our lending rates remain lower than 20 percent per annum, the property business will grow significantly this year," Ciputra said.

Lending rates for housing loans stand at between 17 percent and 19 percent per year, while the subsidized rates on loans for low-cost houses range between 8.5 percent and 11 percent.

Ciputra predicted that the property business will likely even increase by 2.5 times during the Sixth Five Year Development Plan (Repelita VI) period, which began last month.

Ciputra said that housing developers, therefore, will enjoy the robust growth in the property business.

"I believe the private developers' target of building 200,000 new houses during the next five years will be surpassed," he said.

During the Repelita VI period, private developers and the state-owned housing company Perum Perumnas are expected to build 200,000 houses each, with cooperatives building an additional 100,000 houses.

Ciputra said that this year alone private developers have planned the construction of over 50 percent of the national target, with 124,000 new houses slated for this year alone.

Out of the new houses to be built this year, 110,000 units will be designed for people with low incomes, 12,000 for the middle class and 2,000 for the upper class.

Office

Ciputra also said that the demand for office buildings will also grow robustly this year.

"I believe that the occupancy rate for the office building will go over 85 percent this year, as compared to only 80 percent last year," he said.

"Around 300,000 square meters of office space will be offered this year," he said, adding that 1.80 million square meters of office space were sold last year.

The rental rates for the office building range between $16 and $19 per square meter, he said.

However, Ciputra said that demand for space in shopping centers will likely grow slower than the rate of growth.

He said the number of shopping centers will sharply increase in the country in line with the jump in goods consumption.

"In Jakarta and its surrounding areas, for example, at least 10 new shopping centers are now being constructed," he said.

He explained that they include Puri Indah Mall, Citraland Mall, Citra Garden, Shopping Center, Senayan Triangle Mall, Pluit Mega-Mall, Lippo Village Mall, Kelapa Gading Mall, Serpong Permai Shopping Center in Tangerang and MT Haryono Mega-Mall.

He said that at least 95,700 square meters of space for shopping activities will be added this year. However, he added that the 50,200 square meters of space built last year has not been fully occupied.

Last year, developers built five new shopping centers including Metropolitan Mall, Cinere Mall, Bintaro Plaza, Bumi Serpong Damai Plaza and Citraland Plaza, he said.

Ciputra said that demand for hotel rooms will likely will be low this year. (fhp)