Electricity Price Increase Poses As A Threat To Development of Modest Apartments

The Government might fail to attain target of development of Modest & Healthy Apartments and Rusunami Flats in 2010, resulting in inevitable backlog, which was predicted to swell up. Fuad Zakaria, Chairman of the Association of Indonesian Housing Developers (APERSI) disclosed to Business News in Jakarta on Tuesday (13/7).

As known, the target for modest and healthy apartments and Rusunami flats developments for 2009 was set at 160 thousand units, but in reality the realization was only 120 thousand units. Supposedly in 2010 the target was bigger than realization of 2009, i.e. around 160 thousand units. This was meant to catch up with backlog which came to 500 units. However, with the increasing prices of commodities it seemed difficult for the Government to meet target.

The unattained target of modest apartments and Rusunami flats development was on account of two factors:

Firstly, the slump of people’s purchasing power caused by increasing prices of certain commodities triggered by the electricity (TDL) price increase.

Secondly, the change of skim in credit provision for modest apartment or Rusunami ownership. The change of skim platform which still remained uncertain up till now made the banks hesitate to extend their loan. On the other hand developers were just as doubtful about building these apartments for the lower income group.

The Government’s decision to increase basic electricity tariff had triggered price increase of goods and services, particularly basic necessities which lowered people’s purchasing power, hence disabling them to buy houses. To the developers, electricity price increase means increasing prices of building materials, especially cement and iron. What made things worse was that although not related to electricity price, some natural building materials like stones and sand were moving up as well.

Under the circumstances the increase of prices of houses was just a matter of time. However, the degree of increase was not to be known yet, being subject to market situation in a week or two. One thing was sure: as far as prices of building materials were concerned, the prices set by the Government for modest apartments and Rusunami flats were no longer relevant and applicable.