Jakarta post-elections: impact on real estate

February 20, 2017 / By  

As with most elections in Indonesia, policy changes will follow, causing disruptions in the decision-making and approval processes and potentially impacting development in the real estate market. New governments tend to implement a new form of management which sometimes alters development plans and policies and occasionally does not align with public interest.

For example, back in 2010, the Jakarta monorail project was cancelled after being initiated by the previous administration and from 2007 to 2012, only one out of five targeted Bus Rapid Transit (BRT or Transjakarta) corridors were constructed by the governor at the time – despite the need for mass transportation in Jakarta.

Current policies and developments to keep an eye on post-election include:

  • A moratorium on shopping mall development in core Jakarta – enacted in 2011 to reduce traffic congestion. This has led to limited shopping mall supply and high occupancy levels.
  • The opportunity for a higher plot ratio to be given for high-rise projects by paying a fee in some cases. Developers are able to ask for a higher plot ratio, as they are eager to maximise their land resources and maintain their margins. In return, the current government will demand that developers build subsidised apartments or infrastructure (e.g. parks and roads) at a cost equal to the fee. This is a creative way to provide for the basic needs of the city where previously, developers paid for this in cash.
  • Several high profile mass transportation projects are underway including expanding Transjakarta and the more recent Mass Rapid Transit (MRT) and Light Rail Transit (LRT) projects – expected to be operational by 2019. These projects are already proving attractive to developers and, anecdotally, plot ratio incentives have yet to be issued. These will be applied for developments that support the Transit Oriented Development (TOD) concept along transportation routes. Improving connectivity in Jakarta is considered critical by most city residents.
  • Transfer taxes on land and property purchases were recently removed for purchases below IDR 2 billion (USD 150,000). This is one of a number of measures (most of them applied at the national level) that may boost residential sales.

Hopes for Jakarta’s future

Infrastructure developments, maintaining stability and pushing forward social and economic policies, should be a key priority for the next governor. Residents of the greater metropolitan area, including myself, will need to wait and see for at least two months who the governor will be and how he will execute his campaign commitments.

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