As Indonesia’s real estate market has experienced growth in recent decades, the demand for building materials has skyrocketed. The domestic market for both the industrial and retail segment is thriving, with key players rapidly expanding production capacity of high-demand materials such as concrete.
Demand for steel in Indonesia has in recent years expanded at a rate largely unparalleled on the global stage. Opportunities are to be found in the manufacture of value added products catering to a growing automotive sector and a consumer base of rising purchasing power.
Indonesia already makes the global top ten in both production and consumption of ceramic tiles; and the country harbours a lot more potential as the population grows, urbanization continues and incomes rise.
Indonesia's emerging economy is in dire need of better infrastructure, while rising personal income is driving demand for residential and commercial property. These factors put the country squarely on the radar of the global construction industry.
Indonesia’s construction sector faces limitations in terms of human resources, technology and capacity. This section looks at how the sector is faring and what is being done to develop the private sector of the industry to allow them to compete with state behemoths.
Indonesia’s industrial property sector has been subject to challenges as industrial investors have hesitated and delayed their entry or expansion due to greater uncertainty in the local and global economic climate.
Underpinning Indonesia’s infrastructure development challenges are the country’s land acquisition laws which while on paper have offered the legal grounding to acquire land in the public interest since 2012, the gap between what is on paper and how such measures are implemented remains vast.
Indonesia’s new administration under Mr Joko Widodo has been nothing if not vociferous in announcing its plans to focus on infrastructure development to spur continued growth. Recent measures to boost the availability of funding and address the shortcomings of previous land acquisition reform suggest that the government is on the right track.
Cumbersome land acquisition procedures and other regulations have long been blamed for slow progress on public-private partnerships (PPP) for infrastructure in Indonesia. However, investment rules have been substantially overhauled in recent years to make them more attractive for private-sector engagement.
Inadequate infrastructure has long been identified as an obstacle to higher economic growth in Indonesia. This section looks at the new PPP projects available to investors in the infrastructure sector.
Indonesia's economic slowdown spells the end of a property market boom that had seen demand and prices rise sharply for several years running. While demand for residential real estate is buoyed by urbanization, slower growth in household spending is taking its toll on the commercial segment.
At a crucial time for the Indonesian economy with hopes on attracting investment in order to nudge the property sector into a rebound, facilitating foreign property ownership could provide a very welcome boost.
Changes to the law on foreign ownership of property have been long awaited by investors as Indonesia’s property prices remain some of the lowest in the region. This section features information on what shape the upcoming changes will have and the opportunities to be found within it.
In what would be an unprecedented move by a country that has long grappled with the question of its sovereignty in relation to land ownership, the Indonesian government appears set to allow foreigners to buy property. A proposed revision to current laws should enable expatriates to own luxury apartments.
Indonesia’s housing sector is still unable to keep pace with the growing population and demand. Without a significant breakthrough, many fear that Indonesian millenials will not be able to afford to buy in urban centres.
The impending inauguration of Joko Widodo has speculation abound in anticipation of policy shifts to be enacted by the new government. Having suffered from a ‘wait and see’ approach to long-term investments, the property sector in particular has been a topic of discussion and looks set to benefit from renewed consumer and business confidence.
In line with urbanisation and changing lifestyles, the shift away from the traditional model of elderly care being provided within the family home is bringing about opportunities within nursing homes among other more unconventional real estate opportunities.
Slowing GDP growth, rising interest rates and central bank measures to prevent excessive speculation call for a reassessment of residential property investment prospects. While most of these factors point to a less bullish market in the near future, the longer-term prospects remain intact.
Bank Indonesia is set to increase the Loan-to-Value (LTV) limitation for home mortgage loans, thereby reducing the obligatory minimum down payment for primary home buyers. This move is in response to a slowdown in property sales across the board.
Contribution to GDP: 2.79% (Q3 2015)
Mortgage to GDP Ratio: 3.5% (2015)
Housing Backlog: 13.5 million (estimated)
Average Condominium Price: 46,322,208 IDR/sqm (CBD, Jakarta, Q3 2015)
Average Retail Space Rental Price: 829,652 IDR/sqm/month (CBD, Jakarta, Q3 2015), 542,221 IDR/sqm/month (Jakarta, Q3 2015)
Average Office Space Rental Price: 342,581 IDR/sqm/month (CBD, Jakarta, Q3 2015)
Average Industrial Land Price : $220.2 USD/sqm (Bekasi, Q3 2015), $140.6 USD/sqm (Tangerang, Q3 2015)
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.