Indonesia's property market to grow

DUBAI: Indonesia's property market is set for growth, according to a report by Oxford Business Group (OBG) released on Tuesday, Feb 22.

The report said that the robust growth in the country's economy, which is forecast to grow between 6% and 7%, will have a spillover effect to the real estate market.

"As rising income increases purchasing power for middle- and upper-income groups in particular, allows them to invest in new residential properties," the report said.

Commercial properties will also benefit from the growth that will support the retail sector and the growing mall segment.

The banking institutions, with its strong fundamentals reinforced since the 1997-98 Asian financial crisis, are also looking to lend more as confidence in the security of lending has increased. "Rising lending should feed through positively to the real estate sector on both the demand and supply side, by making capital more readily available for construction projects and corporate investment, and by supporting the growth of Indonesia's mortgage market," the report said.

Big-ticket real estate projects, the report stated, continue to rise as developers and their clients capitalise on the economic growth. One example of this is the tie-up between Indonesia's largest listed integrated property developer and mall operator Lippo and retailer Mitra Adiperkasa.

Lippo has agreed to leave 44,500 sq mt of retail space to the retailer for its Kemang Village and St Moritz Shopping Malls, which is due for delivery in 2012 and 2013 respectively.

Another development is the proposed bill that will expedite land acquisition for public purposes, which is expected to be passed soon, and will help spur investor interest in public-private partnership for infrastructure development. One project, the report points out, that will benefit from this new legislation is the Trans-Java toll road. Only 24% of the land has been acquired for the 650-km project as of August 2010.