JAKARTA, June 7: Most Indonesian property and real-estate firms have frozen their operations because of the nation's financial crisis, and an economic contraction forecast for this year will only add to their pain, industry analysts said.They said the property sector, which has depended on strong cash flows and steady demand, was perhaps the worst-hit in the crisis and that the future was bleak.Analysts and property consultants said many property firms were suffering because of huge dollar debts.In addition, dollar revenues have dried up while prohibitive interest rates prevail to prop up the rupiah, which has lost some 80 per cent of its value against the dollar since last July."Almost all property companies have stopped operating right now, with most construction firms also freezing their activities," said Monika Purwowijati from property consultant Colliers Jardine.She said an expected contraction in gross domestic product of between 10 and 20 per cent would push property companies intobankruptcy."Most property companies are actually already technically bankrupt," said Hendra Tan, a property analyst from Bahana Securities, pointing out that foreign debts of many property firms exceeded their total assets.High interest rates and a scarcity of mortgage loans have forced an abrupt halt in residential housing sales, analysts said.Most construction activities were halted because the companies could not repay interest on foreign loans and lenders took over their assets."But the lenders can't sell the assets as no one would like to invest in Indonesia after the recent riots," Purwowijati said.She said most parties involved in the property business were waiting for a new bankruptcy law to be enforced by the Indonesian government."The situation in the property sector is actually stagnant right now as most property developers, investors and bank lenders have adopted a wait-and-see attitude," Purwowijati said.Hardiyanto Gozalim of Trimegah Securities said the rupiah's fall againstthe dollar was the main factor hurting the property sector."High interest rates are just making the property situation worse," Gozalim said.He said development in the residential and office sectors had grown too fast before the crisis started last July. "It led to an oversupply in the property sector amid weak demand," Gozalim said. Prices have slumped as demand has dried up.Many developers have stopped construction, are focusing on selling current stocks and will commence construction only upon a pre-sale commitment.An analyst who declined to be identified said somedevelopers, such as Ciputra Development, Jaya Real Property and Lippo Karawaci, had provided subsidised mortgages to maintain cash inflows.The subsidised mortgages have fixed rates of around 20 per cent for 3-24 months against the prevailing interest rate of 30 per cent.Mortgages are offered through banks affiliated to the companies. Developers have also offered discounts of 25 to 40 per cent on cash purchases to support cashflows.Three leading real-estate firms - Ciputra Development, Duta Anggada and Pakuwon Jati - have declared themselves unable to pay interest to creditors, and analysts said others were likely to follow suit.But there was a brighter side."Most listed property firms look negative, but among them Inotice Jaya Real Property still looks good," said Tan from Bahana Securities.He and other analysts said Jaya Real, with only a small amount of foreign debt and prospects of lucrative property projects in and around Jakarta, was more capable of weathering the economic crisis. "This company is better than others because it is a non-expansive and conservative company," Tan said. Despite the crisis, the company posted profit in 1997 of 19.7 billion rupiah with assets worth 1.29 trillion rupiah.
