Indonesia aims to build up Reit market

Ms Nurhaida of the Indonesia Financial Services Authority says its new measures would not disadvantage Singapore.
Ms Nurhaida of the Indonesia Financial Services Authority says its new measures would not disadvantage Singapore.PHOTO: OTORITAS JASA KEUANGAN

Indonesia's financial regulator is trying to increase the number of listed real estate investment trusts (Reits) there as it moves to deepen its capital markets, according to a senior official.

"The market in Indonesia needs many different types of products available, (which is why) we are pushing for the development of Reits," said Ms Nurhaida, chief executive of capital market supervision at the Otoritas Jasa Keuangan (OJK), or the Indonesia Financial Services Authority.

She said that only one Reit, which owns a mall in the city of Solo in Central Java, is listed on the Indonesia Stock Exchange. It is valued at US$40 million (S$56 million).

"A lot of Indonesian property is being listed in Singapore - about US$3 billion. I think if we can try to pull (them) back into Indonesia, it would be very helpful for the capital markets and economy."

Lippo Malls Indonesia Retail Trust and First Reit are two such Reits listed here that have properties in Indonesia.

Ms Nurhaida, who was in Singapore to meet with the Monetary Authority of Singapore and investors, said in a briefing on Monday that having a more vibrant Reit market will also boost property and infrastructure development in the country, which is one of the government's top priorities.

"We know that the financing for property development from the banking sector will not be enough, and also the state budget," she said.

"So the right financing channel for this would be the capital market and the products suitable for this kind of development would be Reits."

Ms Nurhaida said the OJK is calling for tax rates on Reit products to be further reduced from the current 5 per cent to 1 per cent as a way of drawing more investors.

This incentive, if it goes through - possibly by the first half of the year, she said - would be in addition to the removal of double taxation for portfolio investors last year, signed in October as part of the government's fifth stimulus package.

Ms Nurhaida said that developments in the capital market are moving along "a lot quicker" under President Joko Widodo.

She said these new measures would not disadvantage Singapore, one of Asia's biggest Reit markets.

"Singapore has a lot of alternatives. They don't just have Reits from Indonesia, they have Reits from other countries too."

That about 64 per cent of the companies listed in Indonesia are owned by foreign investors remains a concern for the country, given that they can easily pull out and affect stability, said Ms Nurhaida.

A version of this article appeared in the print edition of The Straits Times on February 24, 2016, with the headline 'Indonesia aims to build up Reit market'. Print Edition | Subscribe