REI calls for removal of government levies

REI calls for removal of government levies

JAKARTA (JP): The Indonesian Developers Association (REI) said
here yesterday that government levies, which account for up to 13
percent of sale prices, discourage its members from building low-
cost housing.

REI Chairman Edwin Kawilarang, in a hearing with the House of
Representatives' Commission V which oversees housing,
transportation and public works affairs, suggested that the
government remove most of the legal levies and also eliminate
corruption.

He said that on average such additional costs added up to 13
percent to the sales price of very low-cost houses, 10 percent to
low-cost houses, 5 percent to medium-class houses and three
percent to luxury houses.

Presently very low-cost houses cost Rp 4.9 million (US$2,130)
per unit.

Edwin said that legal fees which must be paid in order to
obtain the licenses needed to build a single house -- which
include contributions to the construction of education, social
and public facilities -- account for around Rp 200,000. "And we
have to factor in bribes of Rp 400,000," he said.

But he pointed out that this amount varied between local
administrations and depended on the regulations imposed in
regencies or cities.

"REI's head office in Jakarta is still waiting for reports
from branch offices across the country, which will give details
of the various fees and why they are imposed," Edwin said.

Recent reports said the office of the State Minister of Public
Housing has said that at least 26 levies imposed by the office
would be reviewed and are likely to be removed.

Edwin refused to confirm this, saying he would wait for
reports from REI members.

"But if they can be reduced, or eliminated altogether, it
would certainly encourage our members to build low-cost houses,"
he said.

Edwin said the fees were especially burdensome to REI's small
or new members. "Pruning back costs will benefit not only the
consumers, but the producers as well," he said.

Nonetheless, he acknowledged that there were certain regions
which did not impose fees -- either legal or illegal -- on real
estate developers, "because they desperately want us to build
low-cost houses in their regions".

The government in a 1992 decree committed real estate
developers to building houses under a "balanced housing concept",
which requires them to build six low-cost and three medium-cost
houses for every luxury house they build.

However, reports have shown that numerous developers have
ignored their obligation to build low-cost and medium-cost
houses, apparently because they offer low profit margins.

Edwin, in response to questions from legislator Marsinggih
Marnadi, said yesterday REI members were now actually "very
enthusiastic" about complying with the "balanced housing concept"
because there was a huge captive market for this particular type
of housing.

He said REI's 3,811 members have so far built 50,000 units of
luxury houses, 250,000 medium-cost houses and 630,000 low-cost
houses.

He said that some local administrations, such as that of West
Java, allowed developers to choose either to actually build low-
cost houses or instead just compensate it with a certain amount
of money.

Edwin said the captive market might have been the cause of
"fictitious" housing projects.

In such projects, developers cheat customers into paying for
houses but then fail to fulfill agreed specifications, or don't
build the houses at all.

Edwin said that between 1983 and 1995, 15 of REI's members
were found to be involved in such fictitious projects. So far, of
those 15, two have been brought to court, three are currently
solving their disputes with the help of REI and the office of the
State Minister of Public Housing, three have solved their
disputes on their own, and the rest are currently being
processed. (pwn)