Sales of vast tracts of land affect the house prices
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
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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.