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Investors demand 12-plus percent return for Nusantara projects
Private-sector businesses want hefty returns in order to engage in the future capital city, despite numerous incentives already offered to woo investors.
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Construction work takes place to build the core government area (KIPP) of planned future capital city Nusantara in East Kalimantan on Aug. 22, 2023. (Antara/M Risyal Hidayat)
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nvestors have demanded hefty returns in order to get engaged in the future capital city, Nusantara, despite numerous incentives already offered to woo them.
Public Works and Housing Minister Basuki Hadimuljono, who also serves as acting head of the Nusantara Capital City (IKN) Authority, said potential investors typically sought a minimum internal rate of return (IRR) above 12 percent, based on his experience with handling construction projects under his ministry.
In simple terms, the IRR represents the annual profit a project yields for its investors.
“An IRR above 12 percent will definitely be attractive for both foreign and domestic investors,” Basuki said on Friday, as quoted by Bisnis.
The government might need to provide additional support to make construction projects more appealing should the return rate fell below 11 percent, he added, but if the return rate was 12 percent or higher, the project could attract purely foreign direct investment (FDI) without any additional government assistance.
Read also: Developers propose themed districts in Nusantara
The IKN Authority’s special staffer for regional economic area development and peer regions, Rusmin Lawin, said on Monday that an IRR above 11 percent was “attractive enough” for government construction projects.
