Sharing the wealth: Expansion and growth is taking hold throughout the archipelago

The real estate market has been focused on Jakarta for a long time, with a few other focus areas: Bali as a location for holiday homes, some industrial hives near resources and ports, and a few other exceptional areas. However modern development is starting to move beyond those areas. Several bedroom communities have sprung up to the east, west and south of Jakarta, which is remaking retail offerings through malls, hypermarkets and big-box retailers.

Industrial growth is fuelling a similar story. The trend of industry as a leading indicator of modern retail space and condos is repeating in other cities as well. “Overcrowding in Jakarta as well as in other major cities throughout the country has resulted in increased demand for township developments. Families are more inclined to commute to their place of business rather than living in congested cities,” said Tri Ramadi, the president director of Alam Sutera, a local property development firm. Indonesia’s promotional strategy to foreign investors encourages them to look beyond Jakarta.

JABOTABEK: This development is a combination of the names of several Jakarta satellite cities. The most aggressive developer has been Ciputra Development, which is one of the largest publicly traded developers and has projects in five cities. These are mixed-use plans incorporating residential, retail, recreational and commercial elements and are in ongoing stages of completion.

BALI: Despite restrictions preventing foreigners from owning freehold homes, global interest is high for real estate on Indonesia’s premier tourism island. Australians are a natural fit given proximity, and according to a report in the Australian Financial Review in August 2011, investment is on the rise despite restrictions. International firms such as Jones Lang LaSalle have opened up offices there, and property-management firms offer luxury rental bookings and maintenance services. The hotel segment has also benefitted from recent expansion. “There are significant opportunities for investors to get into strata-titled developments of two- and three-star hotels; this is a sector that remains largely untapped,” said Charles Brookfield, the president and CEO of Aston International, the second-largest hotel management chain in Indonesia.

This is a market that could explode if Parliamentary debate on foreign-ownership restrictions end with a loosening of the rules. Giving foreigners the chance to buy, said Jones Lang LaSalle’s head of research Anton Sitorus, could create a demand boom.

SURABAYA: Surabaya is home to Indonesia’s second-largest port and is the country’s second-biggest city. Ongoing expansion is bringing office towers, high-rise condos, malls and other large-scale development projects. The local economy is largely reliant on the port, where the main exports are sugar, tobacco and coffee. For foreign real estate companies, Surabaya is the most likely location for a satellite office after Jakarta and Bali.

BALIKPAPAN: Located in Kalimantan, or Indonesian Borneo, this city’s real estate is developing to meet the demands of resource sector workers. The city has two ports from which timber, minerals, crude oil, coal, gas and other energy forms are exported.

Companies including Pertamina, Total, ChevronTexaco, Schlumberger, Baker Hughes and Halliburton have made Balikpapan a base for operations on Kalimantan, and the derivative effects are evident – resource-based job creation means more locals ready and able to buy homes and condos, work in office towers and shop in malls.

MEDAN: Located on the island of Sumatra in western Indonesia, Medan is developing consumer-driven demand as industry rises around energy deposits, palm oil plantations and other agricultural ventures.

“Development outside of Java will increase rapidly, mostly in second-tier business centres throughout the country,” said Hendro Gondokusomo, the vice-president commissioner of Intiland Development.

You have reached the limit of premium articles you can view for free. 

Choose from the options below to purchase print or digital editions of our Reports. You can also purchase a website subscription giving you unlimited access to all of our Reports online for 12 months.

If you have already purchased this Report or have a website subscription, please login to continue.

The Report: Indonesia 2012

Construction & Real Estate chapter from The Report: Indonesia 2012

Cover of The Report: Indonesia 2012

The Report

This article is from the Construction & Real Estate chapter of The Report: Indonesia 2012. Explore other chapters from this report.