“My outlook is still shaped by the market’s fundamentals including rising demand for residential and business space brought about by continued population growth and economic development.”
As a member of AKR Corporindo, AKR Land has undertaken various luxury property projects across Indonesia ranging from resorts and residential developments to commercial parks. What can you tell us about your company’s background and its main strategies going forward?
AKR Land has over the last six to seven years been an active player in the property sector. The reason behind this can be attributed to Indonesia’s current demographic structure, with more than 50% of the population under the age of thirty and the population growth rate continuing to exceed the global average. We have also seen a rapid rise in the country’s middle class. These trends build towards a market in which there is going to be greater need for property for recreational centres, new businesses and homes that offer a better quality of life. It was thus our vision for AKR Land to be the leader in providing lifestyle, leisure and business amenities to improve upon the quality of life in Indonesia.
We believe that we can create lasting and sustainable growth for our company by generating income from sales as well as through recurring income. It is our expectation that property prices in the country will continue to grow because of the previously described demographic factors and as such it has been our strategy to retain a selection of our properties to enjoy the appreciating value of our real estate going forward. Through this sustainable growth strategy and our focus on innovation as well as operational excellence, we are able to maximise our stakeholders’ value.
AKR Land has been involved in several projects recently such as Gallery West, an integrated business complex in West Jakarta due to be finished by the end of 2016. What else can you tell us about your future projects?
In addition to the Gallery West project we are also looking towards property in Surabaya because we believe that this city will grow faster than Jakarta. The reason behind this is that the market in Jakarta and West Java in general has become saturated and this will continue to be the case unless there is new major infrastructure built. Surabaya on the other hand is Indonesia’s second largest city as well as the second most prosperous but has room for growth in upscale property. AKR Land has thus begun developing office towers, apartments and hotels in Surabaya, as well as an 800 ha integrated industrial and port estate in Gresik, another city in East Java only twenty minutes away. This project will include a marina; something that is still not available in Surabaya unlike Jakarta which has many boat and yacht facilities.
Our company also has developments in Manado and Bali, as it is our belief that Bali will continue to be Indonesia’s icon for tourism and Manado has substantial potential to become an up and coming destination. Though our projects have largely followed the strategy of catering to the specific needs of a given area, we have recently focused on the leisure market in response to a growing middle class increasingly in search of places to relax and go on holiday.
Indonesia’s property sector has over the last decade benefitted from the market’s higher purchasing power and an emerging middle class, but has also had to contend with greater hesitancy as a result of higher interest rates and the 2014 election. Given this context, what is your outlook for the property sector in Indonesia?
If you compare the five largest capitals in the ASEAN – Jakarta, Singapore, Kuala Lumpur, Bangkok and Manila – Jakarta’s property is still the cheapest and even cheaper property can be found in the country’s second cities.
Moreover, rising interest rates can be explained by the government’s motivation to avoid a property bubble and ensure that housing remains affordable for a larger segment of the Indonesian population. Similar polices have been carried out in Singapore, Malaysia and Hong Kong.
As such, my outlook is still shaped by the market’s fundamentals including rising demand for residential and business space brought about by continued population growth and economic development. The potential for property here is thus still immense, particularly if the government opens up the sector to foreign investment.
With the new administration soon to take over, what do you expect to see from Joko Widodo’s government in regards to measures to boost Indonesia’s property sector?
It is my view that Jokowi will seek to build infrastructure and in doing so will boost the price of property here. This actively addresses one of the current challenges in that property prices have continued to rise despite the fact that infrastructure development is lacking.
The new government should also focus on facilitating longer term loans for housing, because as the prices for houses and apartments go up people need more time to repay their mortgages. It is currently very difficult to obtain a mortgage longer than ten years in Indonesia whereas other countries have mortgage plans that extend up to 30 years. Addressing this should enable a larger segment of the country’s young population to purchase their first home.
How is AKR Land positioned towards collaboration with international investors and foreign partners looking to initiate joint ventures with an experienced local company?
Operating in the property sector requires long-term cash flow and because of this we need partners. Our ongoing projects create opportunities for collaboration through the development of amenities such as a golf course at our Gresik Grand Estate and Marina. To guarantee a reliable supply of power and clean drinking water, we will also develop on-site power plants and water treatment facilities and this kind of project has scope for potential cooperation.
From a group level, we are also interested in pursuing opportunities beyond Indonesia and are open to investing overseas having already done so in markets such as China.
As a final message, what would you like Global Business Guide Indonesia’s readers to remember about Indonesia and AKR Land?
Please come and invest in Indonesia while it is in its phase poised for takeoff. The country looks set to surpass $5,000 USD per capita income in 2015 and has plans to reach at least $12,000 USD over the course of the next twenty years. If we can reach this target, there will be big profits for those who invest in Indonesia.