T

he surge in the middle-income bracket is predicted to have a positive impact on the growth of property in 2015, also favored by the development of much-needed infrastructure, such as toll roads in several regions.

The prospects of the Indonesian property industry for 2015 are predicted to remain positive, driven by demand for products catering to the middle-class segment.

The middle-class segment in 2015 is expected to grow to 90 million people, reflecting high purchasing power, according to an analyst.

The population grows 1.49 percent annually, leading to rising demand for residential property. '€œHowever, discrepancy between supply and demand for residential property reached around 15 million units in 2013,'€ the analyst said in a discussion themed '€œHousing Estate-Property Prospect and Business Opportunities 2015'€ held by Kompas.com recently.

Bank Permata economist A. Tony Prasetiantono explained that the property industry had an opportunity to grow due to favorable conditions.

'€œThere should not be any concern among people in the property industry. The government has reserve funds of Rp 291 trillion from the reduction of fuel subsidies. Some of these funds will be transferred to enhance infrastructure development,'€ said Tony, also head of the Center for Economic and Public Policy Studies at Gadjah Mada University, Yogyakarta.

'€œInfrastructure development is very closely related to property development. So, the movement of this industry is set to be more active and dynamic next year,'€ he added.

He went on to say that the country would see higher growth if Bank Indonesia as the regulator loosened the tightening of property credit, especially housing loans (KPR), with a reduction of the loan-to-value (LTV) ratio from 30-50 percent to 10-20 percent for the middle-to-low segment.

'€œThe same goes for interest rates. I don'€™t see the urgency for BI to bump up the BI rate to 7.75 percent. The declining fuel prices in the global market should help save the country'€™s finances.

 '€œIncreasing the BI rate is an excessive reaction. We can see the proof of this with the market reacting negatively. So, if the mortgage interest rate is between 12 and 14 percent for the KPR, the property industry will enjoy healthy growth, whereas for corporations, the ideal rate is 10 percent or less,'€ Tony asserted.

PT Ciputra Residences president Budiarsa Sastrawinata shared the same opinion. He was optimistic that the property sector would continue to show positive growth.

'€œIt is more so with landed houses and apartment subsectors. But, we could see even higher growth if the fuel-subsidy allocation was transferred to the property sector,'€ said Budiarsa.

Bahtera Mulia Propertindo general manager Feldrik Citra also expressed hope that BI would lower the interest rate and revise the LTV policy. He said when the LTV came into effect, sales suffered a 20-percent decline.

'€œWe provide subsidies to consumers, and they are enthusiastic about the products we are offering. That is why we hope the LTV rate will be lowered as there is still a big market to work on,'€ said Feldrik, whose company markets Permata Cimanggis and Cibubur Residences.

Meanwhile, DTZ Indonesia country head Kan Kum Wah said that Indonesia was the right place to do business in 2015 as, this year alone, the country has seen a heavy inflow of foreign money.

'€œMoney flows in not only from Japan and Korea, but also from China. Investors from these three countries invest their money in joint ventures with local developers,'€ Kan asserted during a seminar entitled '€œIndonesia Real Estate 2014'€ held in Jakarta recently.

Kan remained optimistic that despite economic slowdown, the country had huge potential that should draw many investors.

Data from the Central Statistics Agency (BPS) showed that the Greater Jakarta area, comprising Jakarta, Depok, Bogor, Bekasi and Tangerang (Jadebotabek), with a combined population of 22.6 million people, was a big market with huge opportunities that investors should be interested in.

'€œBesides, infrastructure development is being encouraged, especially to connect areas and provide more opportunities for intensive development in areas that previously have seen minimal property development,'€ he said.

Infrastructure currently under development includes the Jakarta Outer Ring Road (JORR) II'€™s Tanjung Priok Port section, which is planned to start operating in mid-2015; Depok-Antasari section (2016); Cibitung-Cilincing, which is still in land-acquisition stage; Serpong-Cinere (set to start operating in April 2015); Cimanggis-Cibitung (construction starting in 2015); Kunciran-Serpong (set to start operating in April 2015); Cinere-Jagorawi (50 percent operational since 2012); and Cengkareng-Kunciran (in the land-acquisition process).

Those planning to purchase property in 2015 should prepare to dig deeper into their pockets, as the price of property is set to increase.

Real Estate Indonesia'€™s (REI) Jakarta chapter chairman, Amran Nukman, said the price increases would be triggered by several factors. The first one is foundation contractors'€™ plan to increase price 5 percent come March 2015.

The price increase follows the increase of the fuel prices, electricity prices and bank interest rates. '€œSo, we should see between a 15 and 20 percent increase,'€ he said.

He said the price increases would affect small developers that target the low-level segment. That is why even the smallest change could make consumers think twice about purchasing property products.

The middle-upper market should remain stable due to its strong purchasing power. So, price increases should not trouble this market so much.

REI Jakarta was optimistic in welcoming 2015 because the city'€™s infrastructure continues to improve. With better infrastructure, the property industry will be positively impacted.

'€œThere will be the MRT, outer ring road, new Transjakarta bus routes '€” all of which are a boon for the property industry,'€ said Amran.

That is why REI set its growth target for the fiscal year 2015 to be around 15 to 20 percent, not much different from that of 2014.

Amran said the trend for property development in the retail and condominium segments would be centered in the suburbs and outskirts of Jakarta.