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Developers launch more luxury apartments, foreigners not targeted
Under construction: Apartment development project at Sudirman Central Business District (SCBD), Jakarta
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Under construction: Apartment development project at Sudirman Central Business District (SCBD), Jakarta.(JP/Arief Suhardiman) (SCBD), Jakarta.(JP/Arief Suhardiman)
Under construction: Apartment development project at Sudirman Central Business District (SCBD), Jakarta.(JP/Arief Suhardiman)
Developers in Indonesia have expressed their eagerness to build more high-end apartment projects to take advantage of the growing market in the country.
While the move seems to coincide with the government's decision to allow foreign ownership of luxury apartments in Indonesia, developers say that affluent locals remain the main target market for luxury apartments.
Summarecon is one of many private developers eager to capitalize on the prospective premium apartment market.
Recently, Summarecon launched a four-tower, 26-story apartment called The Springlake VIEW in Bekasi, West Java.
The apartment offers a lake-front concept and is integrated with CBD Centra Summarecon Bekasi, comprising a mall, culinary center, hotel and other leisure spots.
Intiland, another leading developer in Indonesia, is working on two different projects to build on its existing high-end constructions. The first is One Park Avenue, a Rp 3 trillion project in Gandaria, South Jakarta. The four-tower apartment complex, which will be an extension to Intiland's existing One Park Residences project, will offer 488 apartment units and 31 townhouses in a modern residential concept.
Regatta's appeal lies in its mixed-use concept, offering not only apartments but also a hotel, serviced apartments and an aqua park.
Property player Sinar Mas Land is also jumping into this market by launching an elegant, modern and strategically located apartment in Kuningan, South Jakarta, called The Element, while developer Waskita Karya Realty is set to splash out billions of rupiah on three luxury apartment projects in SCBD Jakarta, BSD Serpong and Alam Sutera.
With the prices of these apartments so high, developers admit that such investments will only appeal to a niche market of affluent buyers and speculative investors.
However, a new market for these apartments will soon open up, as the government is set to, for the first time, allow foreigners to purchase property in Indonesia.
Property developers had repeatedly proposed opening the door to the international market, but always to no avail. Recently, however, amid a prolonged period of slower national economic growth, President Joko 'Jokowi' Widodo agreed in principle to allow foreign ownership of property in the country.
The opening of the market will come with some conditions. Initial statements by government officials suggest that the type of property foreigners are allowed to purchase will be limited to apartments valued more than Rp 5 billion (US$ 375,000).
The Agrarian and Spatial Planning Ministry has been tasked with formulating the full conditions by revising a 1996 government regulation that currently stipulates that the ownership of property for foreigners under the right-of-use category lapses in 25 years, but can be extended for another 20 years.
The proposed revision has been submitted to the President and is said to include changes to the criteria of foreigners, the type of property and the length of ownership period specified in the regulation. The proposed revision is still being studied by the President, who has also reportedly asked for input from economists and industry players.
Developers will obviously be hoping for favorable changes to the regulation, but do not anticipate the changes to make much of an impact to the industry, as the number of foreigners willing to buy would be negligible.
'The biggest market for our apartments is still local people. This needs to be underlined. So even if foreigners are free to buy, the number will be very small. Perhaps, only 10 to 20 percent,' Intiland corporate secretary Thresia Rusia told The Jakarta Post.
Theresia argued that while a lot of foreigners were currently living in rented apartments in the capital, there was no certainty that they would be interested in buying apartments if offered the opportunity, especially not expensive ones.
'Those that usually like to buy big are not foreigners, but local people,' she said.
Vice chairman of developer association Real Estate Indonesia (REI) Arthur Batubara agreed, saying that high-end apartment projects would thrive with or without foreigners in the domestic market.
'This market will still exist even without foreign buyers. There has always been an Indonesian market for this. The market for luxury property exists in Indonesia, though the numbers are few,' he said.
However, he said that opening the gate to foreign ownership was a necessity for Indonesia in order to be able to compete with regional counterparts, especially with the advent of the Asean Economic Community (AEC) at the end of the year.
'If we compare our policy with the existing regional market, it's clear that we do need flexibility on foreign ownership so that our property can compete with regional counterparts like Singapore, Malaysia, Australia and the Philippines. Our market has become more global and we need to adapt,' he said.
