Keep on building
GlobeAsia looks at the prospects for continuing dramatic growth in the property sector, where companies have outpaced other sectoral stocks on the local bourse. While the main benchmark index on the Indonesia Stock Exchange (IDX) was hesitant over the first half of the year, stocks in property companies bucked the trend as investors flocked to buy shares in property and property-related companies.
With developers continuing to put attractive properties on the market, investors believe that property stocks are likely to continue to demonstrate a strong showing for the remainder of the year and beyond. The property index at the local bourse, which groups 59 listed companies, rose 22.2% in the first half of the year, the strongest gain of all sectors represented on the IDX. Infrastructure stocks rose 16% and the consumer sector gained 14%. All three sectors rose well above the 2.4% gain in the main stock index over the period. Analysts and economists in Jakarta say that the growing economy and the rising purchasing power of many Indonesians will in turn push developers to expand their business.
Many property companies, from Bumi Serpong Damai to Agung Podomoro and Lippo Karawaci and Ciputra Development have announced major investment plans. Bumi Serpong Damai, a property company controlled by the Sinar Mas Group, is looking to acquire control of Kota Deltamas, a satellite township in Cikarang, about 75 km east of Jakarta. Kota Deltamas occupies about 3,000 hectares of land and is currently 50%-controlled by Sinar Mas Land, another unit of Eka Tjipta Widjaya’s Sinar Mas.
The other half of the company is shared equally between Sojitz Corporation, a Tokyo-based trading company, and Fame Bridge Investment. Property firm Ciputra Group has announced investment projects in Sumatra and Sulawesi, amounting to almost $160 million. The founder, Ciputra, originally came from Sulawesi so he’s now turning his attention to his home island after a stunning career. He will build housing on 22 hectares of land in Palu, Central Sulawesi, at a cost of Rp550 billion.
His project in the North Sumatra capital of Medan is a mixed-use residential development called Ciputra Bagia City. The project will cost the company a total of Rp1 trillion and will be carried out in a joint venture with another developer. Medan is Indonesia’s largest city outside Java, with a population of more than two million. “This complex will have office buildings, apartments, shopping malls.
“We will also build supporting infrastructure in the complex,” Harun Hajadi, managing director of the Ciputra Group, said in early July.
Agung Podomoro, another of the country’s major property developers, says it is looking to buy land in Jakarta as part of its expansion push in the country. Indra Wijaya, vice president director of Agung Podomoro, said in early July that the company would use some of the proceeds from its bonds sales to finance acquisition of more land.
All these major expansion projects cost money and developers have raised the cash by tapping the debt market or obtaining bank loans. The typical pattern of development also aids the companies, with many customers buying off the plan. As an example, Ciputra Surya recorded Rp1.1 trillion in pre-sales as of June this year, or about 54% of its pre-sales target for the year. Some of the development plans require up-front cash.
Agung Podomoro has agreed to buy 51% of PT Bali Perkasa Sukses for Rp256 billion, planning to build hotels in Seminyak, currently the hottest part of the Bali property market. Agung Podomoro, which also has various projects in Jakarta, has said it will spend as much as Rp11 trillion this year to finance the acquisition of new land. The group’s gigantic projects in Jakarta include Senayan City, Central Park in West Jakarta and a new superblock in Kuningan, South Jakarta. Lippo Karawaci, the biggest property company by market value, has laid out various investment plans.
The company was the pioneer in the mixed-use property market in Indonesia 15 years ago when it built its Karawaci complex in Tangerang, some 25 km to the west of Jakarta.
Many people wondered if the development would work. Today, the Lippo Karawaci complex is known as one of the best residential, business and office centers in Greater Jakarta.
Lippo, which controls this magazine, is now working on two major projects, Kemang Village in South Jakarta and St. Moritz in West Jakarta. Again, it is setting new standards: One residential tower in Kemang Village, for example, includes pet balconies, a totally new concept for Indonesia. Richardo Putra Waluyo, an analyst at Trimegah Securities in Jakarta, says increasing wealth as the economy continues to expand will push more property companies to keep expanding too.
The acquisition of new land banks and the development of new projects will prompt the developers to keep on looking for new growth prospects. “With a disproportionate number of people and the land supply situation in Jakarta, we believe those developers will have an advantage with their premium-area land banks,” Richardo stated in a report published early July. Juniman, an economist at Bank Internasional Indonesia, is optimistic about the rise of the middle class in Indonesia, which he says will provide huge business potential for property companies to tap. “Property is a huge market,” he notes.
Anton Sitorus, head of research at property consultant Jones Lang LaSalle, forecasts that all this work will change the urban skyline: the number of high-rise buildings above 150 meters will increase dramatically in the coming years. By 2015 Jakarta will boast 150 such high-rises, a major jump from the 2009 figure of a mere 40 such buildings. One major project starting this year is The Signature, a 638-meter tower to be built in South Jakarta’s Sudirman Central Business District. The project will be built by the Artha Graha Network, controlled by Tomy Winata, in partnership with MGM Hospitality. At the moment, the tallest building in Jakarta is Wisma 46, a 262-meter office building in Jl. Sudirman built in 1996. GA