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Indonesian luxury developers go affordable

Slower movement in the residential market compels even overseas developers to seek out first-time home buyers

Jakarta developers are exploring lower-end projects. A Hie/Shutterstock[/caption]

Sales of luxury projects remained weak in Indonesia, despite the tax amnesty and other programs primed to boost the real estate sector. No new luxury condominium projects were completed in Q4 2016, while serviced apartment vacancy rates hit 24 percent at the end of the year, reported Colliers.

With flat luxury condominium prices, it may take six to 12 months or several quarters of stability for sentiment to improve sufficiently for a pickup in sales, Colliers predicted.

As a result, several luxury developers are going a few rungs below their usual target segments.

Farpoint Realty Indonesia, developer of such projects as Verde and Sequis Tower, is mulling a project for first-time home buyers in outlying areas of Jakarta. This will mostly include property offerings in the range of IDR400 million (USD30,000), the Jakarta Globe reported, and target young couples with combined monthly incomes of IDR10 million. The project is set for a 2018 launch.

Overseas developers are zeroing in on similar segments. A mainland Chinese property giant is expanding to Indonesia with a lower-end project in western Jakarta, Colliers reported in its Q4 market digest.

More: This Indonesian model quit fashion and became a real estate mogul

Indonesia’s tax amnesty, which ends at the end of March, is filling real estate pundits with renewed confidence, however. “We believe the tax amnesty will help the property industry in Indonesia,” said Wasudewan, country manager of leading property portal Rumah, at the launch of the Indonesia Property Awards last week.

"Last year if you spoke to a developer in Indonesia you would have found them not very confident. Now for us, its getting easier for us to work with developers, because they see that the projects are starting to pick up. They are more confident to start the next phase for their project."

“As you can see, the property business in Indonesia is slowing down, including the residential component,” Maya Arvini, associate director for market development at Farpoint, said on the sidelines of the South East Asia Property Congress last year. “But because of round one of the tax amnesty, we are very optimistic that a lot of money is coming back to Indonesia."

Farpoint still has prime projects in the pipeline though. The Hundred, a mixed-use development in Kuningan, is set to begin construction in 2018, with a tentative completion date of 2020.

The firm is also building a premium office tower for its parent company, Gunung Sewu, in the Sudirman CBD. It will be one of the first office buildings in Jakarta to acquire LEED Platinum certification.

“Hopefully in 2017, Indonesia will be better and better and stable in political and economical terms,” Arvini said.

Read next: 5 things to know about Indonesia’s residential market right now

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