REI prefers escrow to protect buyers

JAKARTA (JP): The Indonesian Real Estate Developers Association's (REI) chairman, Edwin Kawilarang, proposed yesterday to replace bank guarantees with escrow accounts to protect home buyers from untrustworthy developers.

Edwin said that, under the escrow system, home buyers' down payments would be deposited in developers' bank accounts. The banks would supervise the way developers used deposits to prevent scams or wastage.

"The banks are thus entitled to refuse to release money from the accounts if they see developers wasting money or taking high risks," he was quoted by Antara as saying.

Edwin said he would discuss his idea with other members of the association before they deliver a proposal to Minister for Public Housing Akbar Tanjung.

President Soeharto has proposed that developers give home buyers bank guarantees to insure deposits in case developers fail to build houses.

The President urged the public not to buy houses from developers that did not provide bank guarantees.

Developers frequently fail to build houses for buyers who have made down payments.

About 2,500 employees of the Ministry of Transmigration and the National Family Planning Board were cheated recently by a Jakarta Workers Cooperative which promised to build houses in cooperation with a developer.

They paid billions of rupiah in initial payments for two years for houses which have not been built.

Tanjung said he and other ministers would see if the government needed to issue a special ruling for the guarantees.

Edwin said President Soeharto's proposal would overburden small developers.

Only big developers have enough bank deposits for guarantees, he said.

"In fact, the association's members are mostly middle to small developers," he said. (jsk)