JAKARTA • Foreign property developers, led by state-owned China Communication Constructions Group (CCCG), made the biggest investment in Jakarta's residential property in nearly a decade this year as they bet on relaxed mortgage rules boosting demand.
CCCG's US$1 billion (S$1.4 billion) eight-tower complex is targeting young middle-income Indonesian couples and is one of the largest in the capital.
Japan's Mitsubishi Corporation, Tokyu Land, Hong Kong Land, as well as Malaysian Sime Darby, have also signed deals in Jakarta and surrounding areas, according to data compiled by construction consultant BCI Asia.
The projects are estimated to be worth at least US$2.8 billion, or the highest by foreign developers since at least 2007, and come despite a sluggish Indonesian property market.
"Our target market is young couples, young families," said Mr Ferry Thahir, a general manager at China Harbour Jakarta Real Estate Developer, a unit of CCCG. He noted that Jakarta's gridlocked traffic made proximity to the city centre vital.
CCCG is involved in residential projects in other Asian countries such as Myanmar and Malaysia, but in Indonesia it has up to now focused on infrastructure. It is planning another four residential projects in Jakarta, attracted by rising urbanisation - an estimated 200,000 people move to Indonesia's capital every year - and also moves to support the market.
"Efforts by the authorities, like the easing of mortgage rules and the easing of tax rules on property sales, are starting to move the market," said Mr Thahir.
Indonesia's Investment Coordinating Board data shows foreign direct investment in all property segments rose to US$1.67 billion in the January-September period, up from US$1.48 billion a year ago, while the number of projects backed by foreign investors rose 34 per cent to 842 over the period.
Mitsubishi's joint venture with Bumi Serpong Damai aims to build 1,000 housing and retail units, while Sime Darby's partnership with Indonesian developer Hanson International will invest 11.3 trillion rupiah (S$1.2 billion) to develop a 500ha site.
A global slump in commodity prices hit Indonesia's property market, with the value of property sales down 26 per cent last year and 49 per cent in the first nine months of this year, according to research firm Indonesia Property Watch (IPW).
But Bank Indonesia has cut benchmark interest rates by 150 basis points this year and lowered the minimum down payment for home buyers, its second cut in two years. The government has also halved a tax on home sales.
Mr Ali Tranghanda, executive director at IPW, sees property sales growing by at least 15 per cent next year to post the first annual growth since 2013.
Nonetheless, some domestic developers are more cautious. "We are seeing recovery, but it will be gradual," said Mr Tulus Santoso, a director at Ciputra Development, adding that the market may struggle to absorb newly built homes.