Transport infrastructure a key part of Medan’s development plans

The capital of North Sumatra, Medan, is the fourth most populous city in Indonesia and the largest city outside of Java. Located on the Deli River, which flows into the Straits of Malacca, its trading port has made it a strategic location for most of its history, as well as a gateway to the island of Sumatra. Remnants of architecture reflect Medan’s Dutch colonial past, with City Hall, an iconic water tower and the Titi Gantung bridge acting as reminders of a time when the city was called “the Paris of Sumatra”. These days, Medan is more like the most industrious city in Sumatra. Its robust commercial trading and manufacturing sectors – and its proximity to Singapore – make it an important link between Sumatra and the rest of South-east Asia.

Runways, Roads & Ports

Improving transport infrastructure and connectivity in Sumatra is part of the Masterplan for the Acceleration and Expansion of the Indonesian Economy. More flights are arriving into Medan’s Kuala Namu International Airport, which opened in July 2013. In February 2015, national carrier Garuda Indonesia opened routes connecting Medan to Meulaboh and Lhokseumawe, as well as Sabang.

To support the growth in the number of visitors arriving on the new air routes, construction of the MedanKuala Namu-Tebing-Tinggi toll road project began in September 2014. This section of the road is part of a larger vision for a trans-Sumatra toll road that will cross the entire island from Lampung to Aceh. The first 17.8-km section will see Medan, Perbarakan and Kuala Namu connected, while the second 44-km section will link up Perbarakan and Tebing Tinggi. The first section is estimated to be completed by 2016 and the second by 2017.

Additional projects that are expected to boost Medan’s attractiveness include a steam-powered electric plant at Kuala Tanjung, a new Sei Mangke-Bandar Tinggi-Kuala Tanjung rail track and a new port in Kuala Tanjung. The new transport infrastructure will also connect up a new industrial estate. The National Development Planning Board has announced it is accelerating the construction of transportation facilities to support the development of 13 integrated industrial estates in areas outside Java. The government will develop one near Medan at a cost of Rp4.5tr ($372m).

Real Estate on the Rise

Add all this infrastructure construction to a growing population – more than 2m in 2010 – and it is no surprise that residential property prices in Medan have trended upward over the period from 2013 to the first quarter of 2015, according to Bank Indonesia (BI). According to BI, Medan’s residential property price index rose from 205.24 in the fourth quarter of 2013 to 212.17 in the fourth quarter of 2014, and to 214.41 in the first quarter of 2015.

Demand Driven

As the city’s population and middle class expand, increased consumer consumption is driving demand for residential and commercial property. Indeed, real estate analysts say Medan is one of the country’s most promising property markets outside Java, and several high-value developments are set to transform Medan’s property market – and skyline. Medan’s first “super-block” – defined as a large commercial and/or residential block from which vehicular traffic is banned – will feature integrated residential, office and retail space. Construction of Superblock Podomoro City Deli Medan began in February 2014 by developer Agung Podomoro Land (APL) on a 5.2-ha area. When completed, it will comprise condominiums, an office tower and a shopping mall, set in a green area.

Podomoro City Medan may be only the first of many such projects. “We are now looking to expand in second-tier cities, which actually offer more potential with higher economic growth comparing to Jakarta,” APL president-director, Trihatma Kusuma Haliman, said in June 2014. The Setiabudi Condominium project is targeting college students, who are expected to value its location, 1 km from North Sumatra University. Riyadh Group Indonesia, through its subsidiary Lima Putra Realti, has valued the Setiabudi Condominium at Rp300bn ($24.7m). Lima Putra Realty’s president-director, Bally Saputra, told local media student demand and proximity to a toll-road access point encourage investors.