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ajor property developer PT Ciputra Property (CTRP) is investing Rp 1.6 trillion for the construction of a new office tower adjoining their landmark Ciputra World 1 superblock in the city'€™s main business district.

The property company said financing would partly come from strata title sales, valued at Rp 900 billion.

Ciputra Property finance director Artadinata Djangkar added that the total investment for this second office tower was considerably higher than that of the first tower, which was sold out.

'€œWe invested Rp 1.1 trillion in the first tower but the rise in gasoline prices, which sparked inflation, has resulted in increased costs,'€ he said.

Artadinata added that the developer, which launched the second office tower on Wednesday, aimed to complete this project by 2018.

'€œThe tower will have 47 floors with at least 70,000 square meters of office space,'€ he said.

According to him, the developer will allocate 30 percent of the floor space for strata title sales and the
remaining 70 percent for lease.

'€œThe proceeds from the strata sales will then be used to finance the construction of the office tower,'€ he said, adding that the developer expected to collect Rp 900 billion from strata sales.

'€œThis is considering that we have fixed strata title prices at Rp 45 million to Rp 51 million per square
meter,'€ he said.

He noted that the developer would tap into their internal financial resources to fund the project as well, with bank loans '€œas the last alternative'€ given the current credit conditions.

Bank Indonesia has raised the overnight lending rate by 25 basis points to 7.5 percent and the overnight facility deposit rate, or FASBI, by 25 basis points to 6.75 percent. In addition, the volatile exchange rate has also sent the rupiah diving below Rp 11,000 per US dollar, making dollar-denominated loans expensive to finance.

Besides, banks have stated that they will act more prudently in handing out property credit following the central bank'€™s moves to bridle skyrocketing prices through a fresh set of policies, such as higher down payments percentages.

Meanwhile, in the first nine months of the year, Ciputra Property'€™s net profit rose Rp 141.3 percent year-on-year to Rp. 343.8 billion, with revenue increasing 150 percent to Rp 1.1 trillion.

Ciputra Property general manager for commercial building marketing and sales, Helen Hamzah, added that the developer targeted to have sold or rented 10 percent of the total floor space before the end of the year.

'€œWe have already booked early sales from both strata title buyers and lessors to enable us to reach this target,'€ she said.

She added that strata title buyers generally drive early sales stronger while lessors want to see the construction completed first before making a deal.

According to Helen, there are several entities who have started negotiations for leasing. '€œThey are anchors looking to secure landing rights,'€ she said.

She added that strata title buyers included medium-sized companies purchasing office spaces for their own use, and those looking to make capital gains considering that property was '€œa low risk investment with high returns'€.

'€œComparatively, lessors are on average, larger companies including multinationals,'€ she noted.

Artadinata added that although Indonesia would see an economic slowdown of below 6 percent, with growth of the property industry cut by half to 15 percent, office space sales would remain robust.