Flounderville Home Improvement

Nusa Dua – Boss Lippo Group, James Riady put forward his views about the challenges facing the property industry will post the global crisis. The termination of a stimulus package the western countries would provide a major challenge for the property market, particularly in Asia.

“The biggest challenge the property sector is about the stimulus that will expire in the medium term. Music is going to stop,” said James in the Congress of FIABCI to 61 at the Grand Hyatt Nusa Dua, Bali, Saturday (28/05/2010).

According to James, the end of the stimulus package a number of western countries this year will cause a tightening of liquidity which will begin in 2011. Of course, continued James, kwasan Asia, including Indonesia will be affected.

“The challenge is to tight liquidity. If you are not careful can go bankrupt. Moreover, if liquidity withdrawn,” he said.

James explains, during the stimulus program progresses, the liquidity flows into Asia was strong. Because, he continued, in fact, capital accumulation has occurred in Asia in line with the collapse of infrastructure investment the western countries that make foreign investors busy looking for new investment areas, namely Asia.

Therefore, only natural that a stimulus package ends, aspects that must be observed in Asian countries is the potential of drastically decreasing the flow of liquidity.

“Indonesia as the country manager of the liquidity should make a strict asset management. The risk must also be minimized,” he said.

Departing from this view, James condone property in Indonesia if the player prefers to play in the segment of upper middle-class property. Therefore, this segment tends hardiness of the dangers of liquidity.

“To diversify into the lower middle segment was wise. But in Indonesia’s market is still small.’s Assets in the region is still highly coveted premium,” said James.

James said the level of demand for property in Indonesia was still very high. But very short supply. According to him, the players too hard to get into the property sector, lower middle.

“Demand for large properties, but the supply is less. Indonesia’s main problem is infrastructure, so we built the mall and then also go into these areas,” he said.

In a troubled infrastructure, climate and lack of supply in the market competition that will be faced in a climate of tight liquidity, will inevitably have to make property players choose to focus on specific segments, especially the upper middle.

“In the tight liquidity conditions, entry into the apartment segment where there are pre-selling can be an alternative to the liquidity problem,” explained James.

For the record, in the housing sector is not known the term of pre-selling. In the sale of apartments, there is a term called pre-selling, ie, early sales made during the construction of apartments still worked.

With the existence of pre-selling, the developers usually do not need to set up investment funds such as the value of the project, but enough to take 70% only, the rest will be obtained from the pre-selling until project completion.

In addition, James said, the developers also will face a potential increase in interest rates banking. The increase in interest rates will make banks tend selective in giving loans to the developers.

“Therefore, we (the developers) will try to get a ranking in order to get ease of obtaining long term funding,” he explained.

The problem of rising interest rates will automatically increase the cost of funds for developers who tail-tail will push property prices higher. In the tight liquidity conditions, of course, the purchasing power of lower middle segments of society will decline, while in the upper-class communities tend not subject to influence.

Departing from that point it was natural that the Lippo and most developers, such as James said above, tend to prefer to focus on upmarket property segment.

And as stated many property players, to realize the availability of housing for low-income communities need government intervention, such as funding to reduce mortgage interest rates with the aim of encouraging the private developer sector will go down to the lower middle class segment of the property, especially in the middle of a potential liquidity tightness .