Residential apartment buildings in Jakarta. With a large number of private developments and government-funded infrastructure projects, as well as relaxed property ownership laws to expect, Indonesia’s property sector has received a boost.
By Arno Maierbrugger/Gulf Times Correspondent /Bangkok
The Indonesian property market is increasingly getting into the focus of international investors, among them companies from the Middle East, trying to benefit from the country’s newly-found political stability and favourable economic outlook under the present liberal government of President Joko Widodo. With a large number of private developments and government-funded infrastructure projects, as well as relaxed property ownership laws to expect, the sector has received a boost. Adding to this is the growing purchasing power of the Indonesian middle class which has raised demand for a lot of new residential housing projects particularly on the island of Java, the country’s main economic hub.
A Middle East firm that now is contemplating its first foray into the Indonesian property market is Abu Dhabi-based Tasweek Real Estate Development & Marketing. The property investment company, which started its Southeast Asian endeavours with a luxury condominium development in Malaysia in 2011, followed by a vacation villa project, also in Malaysia, one year later, is now considering a new joint venture to build a 26-hectar mixed-use housing, retail and hospitality complex on Bintan island in northern Indonesia, known as a popular holiday destination especially for Singaporeans due to its close proximity to the city state.
According to Tasweek’s CEO Masood al-Awar, the investment volume will be a massive $300mn.
“The growth potential of the Indonesia real estate sector is very strong, driven by factors ranging from solid investor confidence and robust market fundamentals to a consumption-driven economy and excellent corporate expansion strategies,” al-Awar said.
This opinion is supported by a number of real estate analysts and sector experts, saying that – apart from Jakarta – second tier cities on Java, important economic hubs on other islands, as well as holiday destinations such as Bintan and Bali, currently have the greatest market potential for property in Indonesia.
For example, real estate portal Lamudi, which focuses on emerging property markets and is partly backed by Qatar’s telecom firm Ooredoo, ranks Indonesia’s second largest city, Surabaya in East Java, among the “top five real estate hot spots in Asia” in 2015. Lamudi says that Surabaya has “a great amount of potential for real estate investors” due to its “large, diverse economy and 6.7% economic growth.”
Though the Greater Jakarta area and Surabaya still have the highest demand and prices in Indonesia, places on other islands are now experiencing annual growth rates between 10% and 15%, according to the Indonesian Real Estate Developers Association. The most promising cities are Medan on Sumatra, Indonesia’s third largest city; Pekanbaru, a 1mn-people city also on Sumatra, as well as Makassar, the largest city in east Indonesia and capital of South Sulawesi. Other growing property markets include Manado, capital of North Sulawesi; Bandar Lampung on the southern tip of Sumatra; Banjamarsin, Indonesia’s economic hub on the island of Borneo; and Palembang, capital of South Sumatra, all backed by high demand for houses and residential developments and higher spending power of consumers due to low fuel prices.
For the island of Bali, Indonesia’s main tourism destination, real estate agents expect a price hike for residential property of up to 10% in 2015.
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