REI prefers escrow to protect buyers

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)