Indonesia's real estate industry is experiencing strong growth and is seen as awakening as a giant within the region. The property market is growing at double digits annually and outperforming many other economic sectors. Recent developments like achieving investment grade status and relaxing foreign ownership restrictions will help ensure robust property market expansion for years to come. Multiple factors are driving this growth, including Indonesia's growing economy, government infrastructure spending, and reforms supporting greater housing access that will increase demand. With its strong fundamentals like an expanding economy and middle class, analysts predict the real estate boom will be sustained over the long term.

1. Industry A Giant Awakes - Indonesia A Giant Awakes - Indonesia Industry
78 homefinder | May-June, 2011 79May-June, 2011 | homefinder
RUSMIN LAWIN, born and raised in Medan,
North Sumatra, holds various roles in business,
political and social organizations. He is
recognized as one of the well respected young
leaders within Indonesia and the ASEAN region.
He is the President of Realestat Indonesia
Northern Sumatra 2008-2011, Secretary
General of FIABCI International Asia Pacific
Committee 2010-2011 and was recently elected
as the Secretary General of FIABCI Asia Pacific
Regional Secretariat 2012-2014.
A
There is a ring of excitement among prop-
erty players in the real estate industry in
Indonesia, which many real estate-related
analysts agree signal the awakening of a gi-
ant in the republic.
Indonesia’s property market is not only
chalking double digits growth this year,
it promises to outperform many eco-
nomic sectors as a key driver of economic
growth.
Two recent developments – Indonesia’s
promotion to investment grade status and
real estate foreign ownership reform tabled
in late October last year – will ensure a ro-
bust growth in Indonesia’s property market
for years to come.
Achieving investment grade status means
that Indonesia is recognized as a reli-
able and stable borrower of funds while
the strong lobby by both REI (Real Es-
tate Indonesia) and FIABCI (International
Real Estate Federation) Indonesia has
resulted in Indonesia’s legislature relax-
ing restriction on foreign ownership of
real estate.
A more relaxed foreign ownership ruling
will certainly boost the overall property
market in Indonesia where its property
market, even in its capital Jakarta is still un-
dervalued when compared to other major
cities in Asia.
Other growth centers are in cities such as
Medan in Sumatra, Pontianak in Kaliman-
tan, Manado in Sulawesi and of course,
touristy Bali.
Real estate analysts have predicted steady
strengthening of the real estate market in
Indonesia, which has a population of 240
million people. There are at least three fac-
tors driving this growth.
The first factor is the Indonesian economy,
which is more likely to post another year of
strong growth in 2011. Its GDP (Gross Do-
mestic Product) had grown by 6.9% year
per year in the 4Q 2010, the highest figure
in the last six years. This year’s growth is
predicted to reach 8%.
Indonesia’s growing economy will very
likely have a positive impact on the real
estate market; higher incomes mean in-
crease in the purchasing power of the
middle and upper income groups, al-
lowing them to invest in new residential
properties.
Another positive impact of the high level
of growth will be a higher demand for
commercial real estate in the retail sector
and the ever growing mall segment. There
is also a strong demand for office space,
particularly for Grade A property, which
has historically been in short supply.
A high and stable growth at the rate of
6% to 7% will certainly make banks more
confident to lend with requests com-
ing from the demand for new develop-
ment projects and the rising supply to
boost the expansion of the Indonesian
mortgage market.
A second factor is the government’s pro-
posed land acquisition law submitted to
Parliament in late 2010 that will speed
up land price negotiation for acquisition,
which usually can take more than a year.
This impending law is expected to reduce
by half the time needed to start infrastruc-
ture projects.
This law will facilitate the plan by the Na-
tional Development Planning Agency (Bap-
penas), which has estimated in its Mid
Term Development Plan for 2010-2014 that
the government needs to spend Rp2,000
trillion (US$ 216 billion) on infrastructure
development.
Over the next five years, the govern-
ment is expected to work with private
investors to build 20,000km of roads and
15,000MW of electricity through public-
private partnerships.
The third factor that is expected to en-
hance the real estate market is the pass-
ing in December 2010 of a revised hous-
ing law that will allow low income home
buyers greater access to financing.
There is a strong call for the government to
consider allowing foreigners to own proper-
ty in Indonesia in view of the fact that there
are approximately 90,000 expatriates living
in Indonesia.
Two months ago, conglomerate Ciputra De-
velopment reported substantial demand for
property in spite of high rates for housing
loans, at around 9% to 9.5%.
With its strong economy, expanding middle
class, growing housing loan market and in-
creasing demand for high-end real estate in
the residential, commercial and retail seg-
ments,thefundamentals for the local prop-
erty market are solid.
The government is putting in place the legal
framework to support investment and act-
ing to resolve issues related to land acquisi-
tion.Thesepro-activemeasureswillgivethe
realestatesectorawelcomefillipandshould
help to maintain sustained growth over the
long term.
Indonesia
AwakesBy Rusmin Lawin
Photo Radiansyah Yamin