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Property markets outside Java have growth potential
Spread out: A housing cluster in Scientia Garden, Summarecon Serpong
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span class="inline inline-center">Spread out: A housing cluster in Scientia Garden, Summarecon Serpong. Jakarta's high population density leads to the increasing demand for residential estates on the city outskirts.
Property development outside of Java indicates significant progress. Areas outside of Java have just as much potential as cities within the province, demonstrating that the growth of the housing sector is no longer focused on Jakarta and the island of Java.
This potential comes out of growing demand for property, especially for residential estates, alongside the rise of strong purchasing power among people living outside the capital and the island.
Even though the Greater Jakarta area still has the highest registered demand and prices across Indonesia, places outside of Java are experiencing annual growth rates between 10 and 15 percent.
Medan
One of the favorable markets in the country's property industry outside Java is Medan. The rising demand in North Sumatra's capital is also due to Java's increasingly rapid population growth.
PT Lima Putra Realty president director, Bally Saputra, as quoted by Kompas, said that Medan's potential is especially noteworthy when it comes to the apartment and condominium markets, thanks to both positive economic growth in Medan and the city's constant improvements in infrastructure.
'The way that Kuala Namu International Airport has been developed to become bigger and grander has helped make Medan a more attractive place to visit. This will certainly make investment in Medan more exciting,' Bally said during a ceremony for the Setiabudi Condominium in Medan.
The Setiabudi Condominium is an example of the new developments in Medan. The project targets a middle-class segment, particularly college students, in part due to its strategic location only one kilometer away from North Sumatra University, one of the island's biggest campuses.
Bally was optimistic that the project would be absorbed by the increasing number of college students in Medan, a number estimated to be in the hundreds of thousands. The condominium's close distance to an upcoming toll-road access point makes it an even more lucrative investment, he further said.
'I estimate that there will be a 20 to 30 percent increase in the value of investment in the area.'
Makassar
In the past few years, Makassar has been known as one of eastern Indonesia's biggest economic magnets. According to the Central Statistics Agency, the city has experienced 8.5 percent annual growth, higher than the 5.9 percent national growth rate.
With this high annual growth, the city is considered to have potential for various investments. In the property sector, investors target such projects as landed houses, apartments, hotels and shopping centers.
As quoted by the Indonesian Real Estate Developers Association (REI) portal, Mutiara Property president director, Kiplongang Akemah, said that Indonesia's ever-growing population would help the country's property sector to develop.
'On a national scale, the property market should continue to develop, because there will never be an end to demand for housing needs. However, this has to be accompanied by political and economic movement. This year, things have slowed down nationally. One reason that has triggered this is Bank Indonesia's loan-to-value [LTV] regulation,' said Kiplongang, who is head of one of the fastest-growing local property companies in Makassar.
Pekanbaru
Another place outside of Java boasting property development potential is Pekanbaru, the capital of Riau province.
Basko Group, for instance, has been working on the development of the Green City mixed-use project in Pekanbaru, one of three major projects the group is developing alongside Basko Tower in the TB Simatupang corridor of South Jakarta and Grand City in Padang, West Sumatra, which have a total value of Rp 2.2 trillion. 'These three projects will be realized by 2015,' Basko Group finance director Erjoni Suwikar was quoted as saying by Kompas.
Pekanbaru Green City will occupy 2.4 hectares of land on Jl. Jendral Sudirman in Pekanbaru. It will contain a shopping center, two apartment towers and a single office tower. Construction work will begin between March and June next year.
Erjoni said that the investment value of Green City was about Rp 1 trillion.
The project will be followed by Grand City Padang, another multifunction project that will have a shopping center, a hotel, apartment and office area, all of which amount to about Rp 800 billion.
'We will begin development of Grand City Padang come June 2015. We hope to have this finished by 2018,' Erjoni said.
Basko Group currently has 320 hectares of undeveloped land, some 300 hectares of which are in Rumbai, with the other 20 being near Sultan Syarif Qassim II International Airport in Pekanbaru.
'We will use the land in Rumbai for a city-scale housing complex, while the property nearby the airport will become commercial property,' Erjoni said.
To minimize business risks, Basko Group is developing partnerships with strategic partners. So far, the group has collaborated with Paramount Land to continue the development of Pekanbaru Green City.
'They have 80 percent ownership of shares, while we only have 20 percent. They are also interested in developing our land in Rumbai, but we don't have any agreements on that yet, as the location is too far away from the city center,' Erjoni said.
Other Basko Group partnerships are being made with Ciputra Group and Sinarmas Land Group. 'We have a couple of other big names that are interested in working on development with us,' Erjoni said, although he did not mention any names.
