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Fitch: Indonesian Residential Property Faces Near-term Headwinds
December 12, 2013 / 2:06 AM / in 4 years

Fitch: Indonesian Residential Property Faces Near-term Headwinds

(The following statement was released by the rating agency) Link to Fitch Ratings' Report: 2014 Outlook: Indonesia Residential Property here JAKARTA/SYDNEY, December 11 (Fitch) Fitch Ratings says in a special report released today that Indonesian residential property developers will face a more challenging operating environment in 2014, due to stricter mortgage rules, a higher average selling price (ASP) base and buyers delaying their purchases ahead of the general elections due in 2014. Fitch's rated developers are sufficiently buffered against the expectation of lower property transactions and limited flexibility from presales cash flows. The demand slowdown will be more evident in the high- and medium-end segment, where buyers are typically upgraders or investors, and for whom home purchases can be postponed. Fitch expects developers to adjust to the lower demand by limiting new project launches and offering customers longer down-payment tenors, which would raise leverage at the companies. However, the developers have steady recurring income, high development sales margins, and the ability to conserve cash by reducing new land acquisitions; which underpin their Stable Rating Outlook. The ratings will come under negative pressure if there is a significant deceleration in presales leading to a sharp decline in internal cash generating ability, coupled with constrained access to bank loans Over the longer term, property demand will be sustained by Indonesia's young and growing population, property's traditional role as a safety net while the social welfare and pension systems are still undeveloped, and the attractive property values and yields. Prospects are particularly bright in Jakarta and the surrounding areas, where most of the rated developers' matured projects are located. This is driven by continued urbanization, Jakarta's high population density, and the city's role as a government, business, and education center. The report, '2014 Outlook: 'Indonesian Residential Property', is available on www.fitchratings.com or by clicking on the link above. Contact: Erlin Salim Associate Director +62 21 2988 6811 PT Fitch Ratings Indonesia DBS Bank Tower 24th Floor suite 2403 Jl Prof Dr Satrio Kav 3-5 Jakarta 12940 Vicky Melbourne Senior Director Head of Industrials South APAC +61 2 8256 0325 Media Relations: Leslie Tan, Singapore, Tel: +65 67 96 7234, Email: leslie.tan@fitchratings.com. Additional information is available at www.fitchratings.com ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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