Real Estate

Real estate investment near Jakarta in recent years

2017/10/14

近年のジャカルタ近辺での不動産投資

Jakarta metropolitan area expanding to the east

Recently, I've been talking to many Indonesians close to me about real estate investment, and I recently visited the house of an Indonesian who recently purchased a cluster of properties in Bekasi Barat (West Bekasi), about 12km east of Jakarta.

I also visited the model rooms of the Summarecon Group's new development cluster, which has been developing large housing projects in recent years in Bumi Serpong Damai (BSD), west of Jakarta, and Karawang, 45km east of Jakarta.

クラスター住宅

Cluster houses around 1.8milyar in West Bekasi

The construction of the Light Rapid Transit (LRT) urban transit system (LRT) along Jakarta-Cikampek, a toll highway leading from Jakarta to the east, is progressing steadily, and in order to cope with the ever-increasing traffic volume of the Tol, the central part of the Tol has been converted to an elevated highway with two floors, and the financing from China for the construction of the Jakartabandung high-speed railway, which had been in doubt due to the lack of progress in construction work since China was awarded the order, has finally been finalized.

In addition, the new Tol, Bekasi-Cawang-Kampung Melayu (Becakayu), will open this year to ease traffic congestion, and the Lippo Group's Meikarta urban development around Cikarang, which is located farther east of Bekasi, will continue to expand the Jakarta metropolitan area to the east.

(December 2019 addendum) The second Chickampek Expressway (elevated) was successfully opened to traffic in December 2019.

Income gains and capital gains

An Indonesian, who also lives in West Bekasi, told me that a house he bought 8 years ago for 45 juta recently sold for almost 5 times as much as 200 juta, but due to inflation, a house of the same value can no longer be bought for 200 juta.

In a country with high inflation like Indonesia, it is easy to enjoy capital gains on investment properties, but if you don't think about the exit strategy, such as how much to sell at what price and what to do with the money sold, taking into account inflation and interest rates, you won't know whether you have gained or lost.

As for the apartment in the back of Grand Indonesia where I am renting now, the sale price of the market is about 3Milyar, and considering that the price at the time of purchase was about 1.2Milyar, I have a feeling that I can make a big profit by making more than double capital gain if I sell it, but unfortunately it is impossible to buy the same level of property at 3Milyar in the convenient location of Central Jakarta.

Indonesians who are accustomed to investing in apartments and have the financial resources to do so are going for the capital gain from the sale of the property after renting it for 10 years and enjoying the income gain. At the moment when we are approaching the 10th year since the construction of the apartment, there are many advertisements for the sale of the property at Century 21 (a real estate agency), which is a tenant on the ground floor, but when it comes to the property of 3Milyar, it is unlikely that it will sell quickly because the number of people who can buy it is limited.

Even though the income level of the middle class is soaring in Indonesia, it is hard to sell expensive properties near 3Milyar, so for investment properties, properties in the 1.5Milyar to 2Milyar range, which the middle class can afford if they put together a KPA (Kredit Pemilikan Apartemen Apartment Loan) or KPR (Kredit Pemilikan Rumah Housing Loan) and work hard, would be a good target.

Forms of land ownership (freehold and leasehold)

Land ownership forms in Indonesia are categorized as follows.

  1. Hak Milik(Ownership.)
    Indonesian nationals only
  2. Hak Guna Bangunan(right to use a building)
    Most real estate in the company's name can be extended for 30 years plus 20 years.
  3. Hak Pakai(right to use)
    This is the only residence with a fixed term leasehold that can be extended for 25 years plus 20 years and is the only property owned by a foreign resident (KITAS holder who stays 183 days or more per year).
  4. Hak Guna Usaha(business use right)
    This is possible on large business sites and can be extended for a term of 35 years plus 25 years.

Hak Milik is a complete Freehold, while Hak Guna Bangunan and Hak Pakai fall under Leasehold, which allows you to exercise your rights over land leased from others.

A freehold would be the right to occupy and use such land exclusively under a lease agreement entered into with the lessor for a term of 25 to 30 years of validity, while a leasehold would be the right to occupy and use such land exclusively under a lease agreement entered into with the lessor for a term of 25 to 30 years.

Naturally, leasehold properties can be purchased in relatively good locations at low prices, and I used to own a 20-year leasehold property (HGB) on the bridge between Pasar Pagi and ITC in Mangga Dua (Jembatan ITC-Pasar Pagi).

However, the decline in the relative value of Mangga Dua due to the recent shopping mall sprawl has made it difficult to continuously find borrowers and earn income gains, so we sold it in October last year with no capital gains.

Even if the capital is moved to Palangkaraya in Kalimantan, Jakarta will undoubtedly play a role as an economic center like Shanghai in China, and with the possibility of easing the current restrictions on foreign ownership of real estate, the current real estate market in Jakarta, which is said to be in the midst of a bubble, may still be in its infancy.

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