Construction & Real Estate
From The Report: Indonesia 2017
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The construction sector will likely be a bright spot in an otherwise subdued economic growth story in 2016, as the widening infrastructure gap and recent fuel subsidy reforms have driven a surge of new government spending into a massive public infrastructure programme. Despite recording moderate recent increases in sales and prices, residential growth has slowed from the double-digit heyday of 2011-13, while oversupply in the office market is beginning to weigh on prices and rental rates, particularly in Jakarta. A few bright spots stand out, however. The booming retail segment is expected to perform well in 2016 on the back of growing demand, while Indonesia’s secondary cities hold considerably high potential across all segments.

This chapter contains interviews with Rizkan Chandra, President-Director, Semen Indonesia; and Eddy Hussy, Chairman, Real Estate Indonesia.

Articles from this Chapter

Overview

Helping hand: Government spending on several major infrastructure projects is set to drive a strong year for the sector
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Indonesia’s construction sector will likely be a bright spot in an otherwise subdued economic growth story in 2016, as the country’s widening infrastructure gap and recent fuel subsidy reforms have driven a surge of new government spending into a massive public infrastructure programme. New public projects – including ports and airports, more than 2500 km of roads, power plants, and oil and gas facilities – will drive industry growth over the medium term, while private sector investment…

Analysis

Meeting demand: Double-digit growth in hotel construction will help the country accommodate a rising number of visitors
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Although public infrastructure projects including highways, ports and rail continue to dominate Indonesia’s construction landscape, the hotel segment is fast becoming a major growth driver for private contractors, with Jakarta standing as one of the world’s largest hotel construction markets, driven by rising foreign visitor arrivals and the growing business travel segment. Growth in hotel construction project value is expected to hit double digits in 2016, and while the majority of new builds…

Analysis

Concrete proposals: Cement sales have increased rapidly in recent years, with 2016 set to follow that trend
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The cement industry in Indonesia is set to reach new highs in 2016, as the government’s expansive infrastructure agenda drives domestic demand and sales growth across the country. Existing producers are rushing to increase capacity with the launch of new facilities, while a host of new foreign players has also entered the market in recent years, bolstering production capacity and foreign direct investment (FDI) inflows, and helping the country to overtake Vietnam as the leading regional cement…

Interview

The next step: OBG talks to Rizkan Chandra, President Director, Semen Indonesia
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Interview:Rizkan Chandra What is the outlook for the cement sector? RIZKAN CHANDRA: In 2015 we saw a new era for the cement industry in Indonesia. There have been two important issues regarding cement. The first was the beginning of overcapacity for the industry, and the second was the 2.4% decline in cement prices. Those trends have continued into 2016 and will likely remain the same for the next couple of years. Usually cement growth is similar to GDP growth, and in 2015, although GDP growth…

Overview

New era: While overall momentum has slowed, high-growth segments such as retail present opportunities for investors
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Although investment in the sector is still on the rise, Indonesia’s real estate sector is cooling in 2016 after several years of rapid growth, as muted economic expansion impacts consumer purchasing power and new project development. Despite recording moderate recent increases in sales and prices, residential growth has slowed from the double-digit heyday of 2011-13, while oversupply in the office market is beginning to weigh on prices and rental rates, particularly in Jakarta, which saw a record…

Interview

Get going: OBG talks to Eddy Hussy, Chairman, Real Estate Indonesia
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Interview:Eddy Hussy What is your outlook for the property sector? EDDY HUSSY: We still believe the property sector in Indonesia has a positive outlook. We can already see that 2016 is going to be better than 2015 due to new government regulations, amendments to existing laws, improvements in the ease of doing business and relaxation of foreign ownership rules. There are also very promising programmes, such as the government’s “One Million Houses Programme” for social housing. These…

Analysis

Class act: Banks are optimistic that mortgage loan growth will lead to an increase in consumer loans
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A burgeoning middle class is expected to play an important role in consumer lending growth in Indonesia, particularly in the home loans segment. In 2015 PwC reported that the country’s growing middle class has created positive growth potential in consumer banking, particularly mortgage loans, with 56% of the banks it surveyed indicating that mortgage loan growth will be a key driver for consumer loans. Although the central bank, Bank Indonesia (BI), reported that property lending rose by 11.8%…

Analysis

Moving to the city: Increasing urbanisation is creating demand for retail space
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The retail real estate sector is fast becoming one of the most intriguing property segments within Indonesia as the industry continues its evolution away from traditional markets and towards modern retail outlets. The increasingly affluent and globally minded population is creating growing demand for contemporary shopping experiences. Indonesia’s large population continues to migrate to urban areas at an average rate of 4.4% per year, with 53.7% of the country’s inhabitants settling in cities…