JAKARTA • Indonesian conglomerate Lippo Group plans to shift two real estate investment trusts (Reits) with 35 trillion rupiah (S$3.5 billion) in assets from Singapore to Indonesia next year, in order to benefit from new tax breaks offered by Jakarta.
Lippo's move could be followed by at least two other property firms in Indonesia that say they are exploring spinning off assets worth hundreds of millions of dollars into Reits, potentially creating a Reit market that could rival Singapore's, if Jakarta executes its policy pledges.
Last week, the Indonesian government announced incentives aimed at encouraging firms to set up Reits by ending double taxation that may apply to such businesses.
"Because of the government policy, we think Indonesia has very good potential for Reits," Lippo Group chief executive officer James Riady told reporters yesterday.
The property-to-retail group aims to boost the asset value of its Reits to more than 100 trillion rupiah in three to four years, he added. Its two Singapore-listed Reits are Lippo Malls Indonesia Retail Trust and First Real Estate Investment Trust.
Because of the government policy, we think Indonesia has very good potential for Reits.
MR JAMES RIADY, Lippo Group CEO
Other Indonesian firms are already sizing up possibilities for setting up Reits, which typically own or operate commercial property such as shopping malls and office buildings and pay regular dividends to investors.
PT Ciputra Development, an Indonesian property developer, is seeking more details on the government's plans, corporate secretary Tulus Santoso Brotosiswojo told Reuters by phone.
"Our asset (value) is around 15 trillion rupiah. Probably around half of it has the potential" to be placed in a Reit, said Mr Brotosiswojo, citing "our commercial assets that have recurring income such as shopping malls, hotels and offices".
Meanwhile, Mr Hermawan Wijaya, who is a director at property developer PT Bumi Serpong Damai, said Indonesia can compete with Singapore for Reits, if the government successfully executes its policy.
"The domestic Reit potential is there," Mr Wijaya said.
Indonesian President Joko Widodo swept to power last year, promising bold reforms and business-friendly policies. His administration has unveiled a series of measures to kick-start South-east Asia's largest economy, including tax incentives for investors, simplifying investment licensing through deregulation and lowering taxes for firms revaluating their assets.
The country's Chief Economics Minister Darmin Nasution last week announced the government's decision to cut double taxation for Reits.