Housing remains in short supply in Indonesia. — The Jakarta Post
JAKARTA: The government is looking to foreign developers to support President Prabowo Subianto’s ambitious housing programme, but many Chinese firms that could in theory handle large-scale projects face constraints in expanding abroad due to financial woes following the property bust in their own country.
China has been the largest foreign investor in Indonesia’s real estate market in recent years, but the government’s target of building three million homes a year is a herculean task.
There are also doubts about foreign investors’ interest in Indonesia’s housing programme, unless the government provides guarantees on land status and market demand.
Housing remains in short supply in Indonesia, with the gap between home demand and existing ownership amounting to 9.9 million units in 2023, where demand is defined as any family that does not own a home or whose home is deemed substandard.
As the population kept rising, this so-called housing backlog has proven a vexing challenge for successive governments.
President Prabowo’s administration has vowed to build two million homes in rural areas and one million in cities and has established a housing task force led by his brother Hashim Djojohadikusumo.
Hashim stated that the programme aimed to tap not only local investors, but also international “funds” from Abu Dhabi, Qatar, China, India and Singapore.
“There are quite a few countries that want to invest in President Prabowo’s social housing programme.
“Thus, it will be materialised,” he asserted.
Public Housing and Settlements Minister Maruarar “Ara” Sirait previously said that Housing deputy minister Fahri Hamzah had been dispatched to approach potential investors in China and Abu Dhabi, and to smoothen the process in case of interest.
He stressed that the process should go beyond signing memorandums of understanding (MoUs).
“An MoU is just an initial agreement. We need detailed plans on how they can help, when, where, how much and on the rights and obligations to form a legal partnership.
“As a businessman who often deals with foreign investors, I understand that the process is not easy.
“That is why I have instructed my deputy to oversee the process,” he said on Nov 28, as quoted by Detik.
Ara highlighted several factors that could attract foreign investors to the housing programme, namely legal certainty, the large market, public support and top-level political backing.
While the government is targeting potential support for its housing programme from several countries, it appears to be pinning its hopes on Chinese developers in particular.
Investment and Downstream Ministry data show that China, including Hong Kong, invested 16.48 trillion rupiah (US$1.04bil) in Indonesia’s housing sector, industrial estates and office buildings in 2022.
The next biggest sources of foreign direct investment into the property sector were Singapore, the Netherlands and Japan with 10.75 trillion rupiah, 4.96 trillion rupiah and 3.7 trillion rupiah, respectively.
For Chinese developers, who are struggling with oversupply in their home market for both residential and commercial property, the allure of business opportunities abroad is obvious, but seizing such opportunities is not straightforward.
Roland Berger noted that some Chinese developers had tried to expand to South-East Asia, such as Country Garden in Malaysia and an unnamed company in Indonesia but both reportedly failed, which the consultancy attributed largely to a lack of local market understanding.
“The initial intention for Chinese developers going abroad is to target Chinese investors who would like to diversify their investment globally.
“Their business and profitability model are different from pure local developers,” Roland Berger partner Hao Jiang told The Jakarta Post on Tuesday. . — The Jakarta Post/ANN
