Sign up for the GBG Indonesia Quarterly Business Intelligence Report for the latest news on your sector.
Sign Up
Indonesia’s population is getting older. In 1970 the elderly constituted just 1% of Indonesia's population. Today it is 8.5%. By 2050 that figure will be 25.5% according to the United Nations. There are currently 20.8 million people aged over 60 in Indonesia, and this will increase to 75 million by 2050. Some other estimations state that by 2050 a third of Indonesia's population will be over the age of 60. In line with urbanisation and changing lifestyles, the shift away from the traditional model of elderly care being provided within the family home is changing, mirroring that of other advanced markets, and bringing about opportunities within nursing homes among other more unconventional real estate opportunities.
In addition to the growth in the number of old people, Indonesians are also living longer. Life expectancy is projected to increase from 65.4 years in 2000 to 69.9 in 2015, and to 72 by 2025. However public spending on healthcare is currently low by regional and global standards which provides enormous opportunities for the private sector (See Indonesia’s Healthcare Sector). A report from KPMG in 2012 found that there are only 0.6 hospital beds per 1,000 people in Indonesia, compared to 2.1 in Thailand, 1.8 in Malaysia, a global average of 3.0 and an average of 5.0 for OECD countries. Healthcare expenditure accounted for 2.8% of GDP in 2009, compared to 3.3% in Thailand, 3.9% in the Philippines, 5.8% in China and a global average of 8.7%.
Besides, as Indonesia’s social landscape changes with women entering the workplace in ever increasing numbers, the country will have to find new ways of taking care of its senior citizens, who have traditionally lived within the extended family. This increasing elderly population, coupled with families’ inability to take care of their elderly relatives, has prompted developers to venture into nursing home projects.
Cushman & Wakefield Indonesia said that nursing homes could see greater demand in the near future, especially in Greater Jakarta, due to the change in Indonesia’s demographic trends as Indonesia’s elderly population will continue to expand and some 10% of them live in Greater Jakarta. According to the Jakarta Statistics Agency, the number of residents aged 65 or older in the city was 343,020 people in 2013, a 16% increase from 293,812 in 2010. By 2025, it is predicted that 32 million to 36 million people, or around 11.34% of Indonesia’s population, will be considered elderly.
The country has seen a spike in interest from foreign companies to invest in the assisted living services sector, according to the Indonesia's Investment Coordinating Board (BKPM). The BKPM has received interest from Australian and Japanese investors who wish to participate in Indonesia's assisted living industry and are ready to spend $26 million USD and $40 million USD respectively.
However nursing services are currently on the government's negative investment list. The list specifies those sectors of the Indonesian economy in which foreign investment is either prohibited or limited. Nursing services are limited to 49% throughout Indonesia, with the exceptions of Makassar and Manado (51%) and Jakarta (70%).
However, BKPM has since October 2015 been taking suggestions from businesses and the public about possible revisions to the list and it has already hinted at opening up several of those sectors to foreign investment and ownership, including elderly care and assisted living services. The most recent revisions in February 2016 did not include this sector, yet further revisions may be on the horizon (See Indonesia’s New Negative Investment List; A Big Bang?).
Jababeka is one of very few property developers that sees nursing homes as a relatively untapped product with a favourable future outlook as the company is developing an upscale nursing home for the elderly called Senior Living D’Khayangan. Jababeka plans to construct 100 sprawling "senior towns" across the country, with a particular focus on retirees from Japan. The company will enlist the help of business partners such as Japan's Longlife Holding, a provider of nursing care services.
Jababeka's new plan envisions senior towns that have hospitals, educational facilities and other infrastructure in addition to housing. The towns will be located mainly in West Java. The first is being built on a 1,500-hectare site in the Tanjung Lesung resort area. In addition to villas and apartments, there will be a hotel, golf course, marina and commercial facilities. There will also be a highway and an airport. $140 million USD has been invested already and the entire development project will cost $500 million USD more.
Another developer investing in retirement homes is PT Jaya Real Property Tbk, one of Indonesia's leading property developers with a diverse portfolio of residential and commercial developments in South, West and Central Jakarta. Its flagship site, Bintaro Jaya, is a self-contained 2,000-hectare community in close proximity to South Jakarta. Within the site, approximately 3,000 sqm has been identified for development of a premium seniors’ community in partnership with Living Well Communities, an Australian developer and operator of luxury homes for seniors. The Living Well residence will be built in Bintaro, Tangerang, in Banten, and it is set to launch in 2017, targeting elderly middle-upper class people in Jakarta and its surrounding areas. After completion of the Bintaro project Living Well targets to build six more similar projects in Jakarta, Surabaya and Semarang in the next four to five years.
However, it will take some time before the projects gain popularity. Indonesian Property Watch (IPW) says that Indonesia’s cultural values, which emphasise the importance of respect and devotion to one’s parents, discouraged people from sending their parents to nursing homes. Therefore, nursing home projects are deemed to be a high-risk venture.
Previously, Agung Podomoro developed an apartment block for senior citizens at Podomoro City in Taman Anggrek, West Jakarta. Demand for the apartments was so low that they had to change the establishment into something else. Yet, new developers have understood that in order to attract more residents, they need to create clustered housing estates for senior citizens instead of apartment units as old people would feel safer living in a house and need to live surrounded by other people.
Those new property developments will moreover be supported by the 2014 ASEAN Mutual Recognition Arrangement on Nursing Services, whose objectives are to facilitate mobility of nursing professionals within ASEAN; exchange information and expertise on standards and qualifications; promote adoption of best practices on professional nursing services; and provide opportunities for capacity building and training of nurses.
Indonesia’s youthful demographics are often touted as one of its key selling points as an investment destination, however improving access to healthcare is also seeing the elderly population grow even though it is a proportionally small part for now. Demand for healthcare facilities from the local population offers opportunities for the longer term as lifestyles and attitudes continue to evolve, however demand from foreign retirees offers immediate short-term opportunities. Indonesia’s warm tropical climate and relatively low cost of living in tourism friendly areas such as Yogyakarta, Bali and Lombok are highly attractive to senior citizens from markets such as Japan, South Korea and Australia. Those with experience in managing nursing homes and senior citizens’ developments in addition to those offering specialised training within the field of elderly care can find attractive opportunities in Jakarta as well as tourism hotspots such as Bali by working in partnership with local property developers and healthcare providers.
Global Business Guide Indonesia - 2016
Contribution to GDP: 2.79% (Q3 2015)
Mortgage to GDP Ratio: 3.5% (2015)
Housing Backlog: 15 million (estimated 2016)
Average Condominium Price: 48,100,000 IDR/sqm (CBD, Jakarta, Q3 2015)
Average Retail Space Rental Price: 500,00 IDR/sqm/month (CBD, Jakarta, Q1 2016), 545,968 IDR IDR/sqm/month (Jakarta, 2016)
Average Office Space Rental Price: 401,010 IDR/sqm/month (CBD, Jakarta, Q1 2016)
Average Industrial Land Price : $221.51 USD/sqm (Bekasi, Q1 2016), $144.16 USD/sqm (Tangerang, Q1 2016)
Relevant Law: Government Regulation No. 41 of 1996 on Housing or Residential Ownership for Foreign Citizens Based in Indonesia allows foreigners to own leaseholds of up to 70 years subject to renewals at 25, 20 and 25 year intervals.
digg
