Analysts warn 'rusuna' may face delay or termination

Mariani Dewi ,  The Jakarta Post ,   Jakarta  |  Fri, 11/14/2008 11:13 AM   

Property analysts have warned that buyers of state-subsidized apartments (rusuna) could see the construction of their units delayed or stopped if the current economic uncertainty causes developers to lose their commitment. 

However, the housing association and government pledged the continuation of the projects. 

Anton Situros, research head at Jones Lang LaSalle property consultancy, cautioned buyers to expect a delay in the delivery of their units, or at the very worst, no delivery at all. 

He said most property developers were likely to reschedule their project completion dates, and subsidized housing developers even more so. 

"In the current uncertainty, developers are consolidating their projects. They may cancel those still at the planning stage. The apartments that are already launched may be completed, but could face a delay of a year or two," he said. 

"For big developers, the rusuna projects are showcase projects for CSR. I don't think they will make them a top priority," he said, citing the relatively low profit margin from such projects. 

The subsidized housing projects began last year and are targeting 1,000 apartments to house 350,000 low- to middle-income families. Apartment prices are capped at Rp 144 million (US$12,200). 

Wira Agus, a senior manager at consulting firm PT Property Advisory Indonesia, said the risk existed but had not been observed yet, with the impact from the economic turmoil only starting to be felt in October. 

To date, he said, the ongoing projects were still running, albeit at a slower rate. 

"In the current condition, developers may slow down the pace of construction," he said. 

"Delays of a month or two are common in Jakarta. The possibility of cancellations is what we have to worry about." 

Agus said around half of big developers received funding from banks or investors, with the money usually disbursed in stages as construction progresses. 

"Developers receive the full payment from buyers in advance and may pace their spending. Those nearing completion may be safe, but buyers with units still in the early stages of construction may have to watch out," he added. 

However, Indonesian Developers Association chairman Teguh Satria stressed that developers of sold-out subsidized housings were working at full tilt to complete the units. 

"As long as the units are sold out and buyers' bank loans are approved, developers will continue with the construction. Around 70 percent of projects are financed by loans, so developers don't want to delay, because they need the income to pay back the bank loans," Teguh said. 

Bernaldy, head of the rusuna division at the Public Housing Ministry's Formal Housing Unit, said the government was trying to reduce the financial burden on developers. 

"We value engineering. We let them minimize their designs within safety margins. The Jakarta administration has also agreed to halve the retribution fee," he said. 

Bernaldy confirmed the projects still had many takers. 

"No developer has pulled out of the subsidized housing project. There are some who have not started, but that's because of the paperwork," he said. 

He was optimistic the country was still on schedule to build 1,000 towers by 2011 as promised.