Sales of vast tracts of land affect the house prices
By Benget Simbolon Tnb.
JAKARTA (JP): Heny considers herself lucky. In 1989 she bought a house in a housing complex in Bekasi, east of Jakarta, for Rp 43 million. Today it is worth more than Rp 100 million.
"I can't believe it, the prices of houses in the area are getting higher and higher," she said.
No one can deny that everything increases in price, mostly due to inflation. But the increase in land prices go way beyond the inflation rate. In the last 10 years, inflation averaged about 10 percent a year.
What is behind the sharp price increase in property?
Panangian Simanungkalit, chairman of the Center for the Study of Indonesian Property, said inflation does not contribute much to the rocketing prices of land and houses. Big developers buying large tracts of land is the main factor.
In Bekasi, Bogor and Tangerang, 95,915 hectares or 78.86 percent of the total 121,631 hectares of residential land is controlled by big developers. The other 21.14 percent is controlled by small developers.
Of the three towns, Bekasi has the most land acquired by developers, accounting for 82.19 percent of the town's 22,874 hectares of residential land.
It is followed by Bogor with 79.47 percent of its 46,304 hectares of residential land, and Tangerang with 76.86 percent of its 52,453 hectares of residential land.
Simanungkalit said that the aggregating of land by developers might increase as the government has started reissuing land acquisition permits.
Last year, the government decided to stop granting new land acquisition permits in an effort to reduce land aggregation. But last month the government changed the policy, saying there were still small developers in need of land permits for building houses, particularly low-cost homes.
The opportunity to get new permits, however, is not limited to small developers.
The government has rezoned some 180,000 hectares of land as residential areas in the three towns.
"This may increase the amount of idle land in Greater Jakarta," he said in an interview with The Jakarta Post.
According to Simanungkalit, developers have the capacity to build 60,000 houses a year. For that many they need only 15,000 hectares of land. But 48,000 hectares of the combined 121,631 hectares of residential land has been allotted to them under land acquisition permits; 33,000 hectares more than needed.
"The 33,000 hectares of land will be neglected," he said.
Idle land
Panangian said that if the amount of idle land rose, the cost of keeping land would also increase. The cost of holding on to land would escalate because of interest on loans. "This is the main cause of expensive house prices in Greater Jakarta," he concluded.
He said that if the land price was presumed to be Rp 25,000 (US$10.64) per square meter then the existing 33,000 hectares of unused land would be valued at Rp 8.25 trillion ($3.5 million).
The average price of land outside Jakarta is now about Rp 200,000 per square meter.
He said that if 70 percent of the Rp 8.25 trillion was derived from bank loans then the developers had to pay at least Rp 1.16 trillion in interest at a rate of 20 percent a year.
"Due to the interest burden, developers have to raise their house prices by an average of Rp 15 million a unit every year," he said, adding that this did not include other costs.
State Minister of Public Housing Akbar Tandjung acknowledged the practice of land aggregation.
"That's a real fact. We should give the developers a direction to use the land for housing development," he told the Post last week.
State Minister of Agrarian Affairs/Chairman of the National Land Agency Soni Harsono suggested recently that the government change the current land taxation system and impose a higher tax on idle land.
He said that under the current system, tax on idle land is lower than tax on developed land.
The current system tends to encourage speculation among buyers and owners because it is only based on the economic value of land, according to Simanungkalit.
"A new taxation system is necessary to stop people from neglecting land and accumulating more idle land," he said.
Simanungkalit said the government should be firm in its efforts to tackle land problems. "This can be done by forcing developers to accelerate housing development or by limiting land ownership," he said.
Table 1: Land acquisition by big developers in Bogor, Bekasi and Tangerang (December 1996)
Location Land acquisition permits Land acquisition
permits (in hectares) by big developers
area
(in hectares) percentage ---------------------------------------------------------------- Bekasi 22,874 18,800 82.19 Bogor 46,304 36,800 79.47 Tangerang 52,453 40,315 76.86 ----------------------------------------------------------------
121,631 95,915 78.86
Sources: The National Land Agency and Panangian Simanungkalit & Associates.
Table 2: Mega property projects of the 21th century in Jakarta's bufferzone areas
No. Developer Location Project name Land Area
(in hectares) ------------------------------------------------------------------- 1. Salim Group Karawang Kota Bukit Indah 5,000 2. Metropolitan Group Cikarang Kota Baru Cikarang 5,400 3. Lippo Group Cikarang Lippo Cikarang 5,000 4. Consortium Bekasi Kota Legenda 2,000 5. Consortium Bekasi Cikarang Hijau 1,400 6. Lippo Group Bogor Royal Sentul 2,000 7. Bank Pacific Group Bogor Lido Lakes Resort 1,700 8. Ciputra Group Bogor Kota Citra Indah 1,200 9. Consortium Bogor Telaga Kahuripan 750 10. Metropolitan Group Bogor Kota Baru Metropolitan 600 11. Consortium Bogor Rancamaya 550 12. Consortium Bogor Jonggol Asri 30,000 *) 13. Consortium Tangerang Kota Kekerabatan Maja 8,700 14. Metropolitan Group Tangerang Kapuk Naga 8,000 15. Consortium Tangerang Bumi Serpong Damai 6,000 16. Tigaraksa Tangerang Kota Baru Tiga Raksa 3,000 17. Lippo Group Tangerang Lippo Karawaci 2,600 18. Jaya Group Tangerang Bintaro Jaya 2,300 19. Ciputra Group Tangerang Citra Raya 2,000 20. Jaya Group Tangerang Kota Puri Jaya 2,000 21. Jaya Group Tangerang Kota Jaya 1,745 22. Summeracon Group Tangerang Gading Serpong 1,700 23. Ciputra Group Tangerang Pantai Indah Kapuk 800 24. Modern Group Tangerang Kota Modern 770 25. Argo Manuggal Group Tangerang Alam Sutera 700 -------------------------------------------------------------------
96,915 Source: PT Panangian Simanungkalit & Associates, Jakarta
*) Project has not started.