Bitcoin fever hits US real estate market

Yahoo – AFP, Leila MACOR, January 14, 2018

View of a beach from a condo building in Florida, where bitcoin fever has hit
 the real estate market (AFP Photo/Jose ROMERO, RHONA WISE)

Miami (AFP) - Bitcoin fever has hit the US real estate market, especially that of Florida, offering foreign investors a way to dodge currency controls at home and US economic sanctions.

As of the end of last year, the digital currency was listed as a way to pay for some 75 properties for sale, especially in south Florida and California, according to the real estate firm Redfin.

"Bitcoin accepted" is a message now seen in the description of homes for sale in the Miami area.

One seller is going even farther, saying he will take only bitcoin (33 of them to be exact) for his half-million-dollar downtown condo in the Florida metropolis.

Bitcoin has been on a roller coaster ride of late, shooting up to nearly $20,000 a piece in mid-December and then dropping sharply around Christmas. It started the year at around $14,000.

Its use in real estate transactions is novel, and agents are wary because of its high volatility.

"I'd be blown away if a year from now we see hundreds of real estate transactions in bitcoins," said Jay Parker, Florida CEO for the Douglas Elliman brokerage agency.

Still, such transactions can be useful for foreigners who want to invest in the United States and cannot otherwise do so, said economist and bitcoin expert Charles Evans of Barry University.

"This seems to be driven by international investors who are circumventing inefficient banking and currency controls at home, and by US cryptocurrency enthusiasts," Evans told AFP.

"The governments in those countries restrict the amount of money that their residents are allowed to transfer abroad through the banking system. Bitcoin enables individuals there to bypass such restrictions," he added.

This could be a draw for investors, who even before the bitcoin rage were already hot on the real estate market in south Florida.

Nearly half of all foreign buyers of property in south Florida are from Latin America.

According to the National Association of Realtors, over the past five years, investors from Venezuela, Brazil and Argentina -- in that order -- have led purchases in this part of the state.

Money laundering?

Bitcoin offers another advantage for some foreign investors: it lets them dodge US economic sanctions.

Evans cited the example of Venezuela, which imposes strict currency controls and is enduring runaway inflation that surpassed 2,600 percent in 2017.

What is more, many senior officials in the government of Venezuela's President Nicolas Maduro have been hit by sanctions imposed by Washington, which considers his administration a dictatorship.

Evans said there is also a lot of interest in bitcoin among Iranians, whom he described as "doubly hit" with restrictions in Iran and international sanctions.

It is an open secret that money laundering fuels the real estate market in south Florida. But instead of hiding the practice, bitcoin could have the opposite effect.

The crypto currency "is a terrible medium for large-scale money laundering, because all bitcoin transactions are recorded in the publicly available transaction record known at the Blockchain," said Evans.

Although bitcoin has been associated with the drug trade and cyber attacks, Blockchain "leaves a lot of fingerprints," former Florida representative Jose Felix Diaz told Politico.

"So if you're using it for illegitimate reasons, the state and the federal government should have every tool at their disposal to go after you," Diaz said.

Last year, Diaz sponsored a bill-turned-law that includes bitcoin in Florida's laws for fighting money laundering.

Real estate agent Parker also said money laundering via bitcoin is far from posing a risk because "the beneficial owners of the real estate are always going to be able to be traced."

Parker said the fad of doing real estate deals in bitcoin could be as volatile as the currency itself.

"I think it's a gimmick. There's not much risk. The only risk is if the currency crashes before you can liquidate it," said Parker.

"I think the people that are using bitcoins to try to market their properties are doing it with the very purpose of getting you to write about it, getting their properties exposure," said Parker.

Taste for luxury: Ethiopia's new elite spur housing boom

Yahoo – AFP, Justine Boulo, December 2, 2015

Large villas are seen at a new housing development on the outskirts of Addis
 Ababa, the capital of Ethiopia White fences and manicured lawns surround the
 villas of an elegant housing estate in Ethiopia, a potent symbol of the emerging elite
 in a country better known for drought and famine. Just 10 years ago, the affluent
suburb of Yerrer View was little more than fields. Today, imposing villas with
pillars stand behind neatly-trimmed oleander hedges. (AFP Photo/Zacharias Abubeker)

Addis Ababa (AFP) - White fences and manicured lawns surround the villas of an elegant housing estate in Ethiopia, a potent symbol of the emerging elite in a country better known for drought and famine.

Just 10 years ago, the affluent suburb of Yerrer View was little more than fields. Today, imposing villas with pillars stand behind neatly-trimmed oleander hedges.

A comfortable commuting distance of 20 kilometres (12 miles) from the capital Addis Ababa, the 600-hectare (1,500-acre) estate has tapped into a growing taste for high-end luxury among wealthy Ethiopians, who are looking for a home which reflects their success in business.

Over the past decade, this Horn of Africa nation has seen an annual growth rate of nearly 10 percent, World Bank figures show, due to a boom in construction, manufacturing, trade and agriculture.

For those in Africa's second most populous country who are enjoying that growth, the estate symbolises much more than a home.

"We are selling a lifestyle more than just housing," says Haile Mesele, a civil engineer who heads Country Club Developers, the property firm behind the development.

"We don't do any advertising. We prefer that the residents themselves spread the news, and in a way, chose their own neighbours," he said.

According to a recent study by New World Wealth (NWW), a South Africa-based market research consultancy, there are now 2,700 millionaires in Ethiopia, reflecting an increase of 108 percent between 2007 and 2013 -- the fastest growth rate in Africa.

"There is a demand for luxury real estate," said Wunmi Osholake, who runs the Ethiopian branch of online real estate platform Lamudi, which focuses on emerging markets, with customers eyeing property costing over $330,000.

The price, she adds, has no upper limit.

A new Manhattan?

And the luxury boom is not just in the suburbs.

In the centre of Addis Ababa, the bustling Kazanchis business district is also undergoing major renovations.

Eighteen months ago, May Real Estate Development began a new residential development called the Addis Gojo project, which incorporates 113 apartments in three 10-storey towers located near several embassies.

"For those working for the UN or diplomats, it is very central. The district is a new sort of Manhattan," says project manager Bitania Ephfrem.

"The lifts work, which is not the case elsewhere," says Bitania, adding they are planning rooftop swimming pools, a gym and a restaurant "so that residents don't need to leave the premises."

A standard apartment between 140-170 square metres (1,500-1,800 square feet) rents for about $1800 per month (1700 euros).

Villas for locals

Such luxury housing has been designed to meet the needs of Ethiopia's emerging new middle class. At the estate in Yerrer View, hundreds of the homes from stand-alone villas to modern apartments are already occupied with plans for a total of 5,400 houses for some 20,000 people.

When completed, the estate will also include a golf course, a five-star spa hotel, a shopping centre, school and clinic and an organic farm covering about 200 hectares.

"When we began, economic growth wasn't very strong," recalls Haile. "Half of our clients came from the diaspora. But since then, the economy has become a lot stronger and nearly 85 percent of our residents are local."

The customers have high expectations. Pushing open the door, Mesele shows off a 500 square metre (5380 square foot) property built on a plot measuring 1,000 square metres.

A large open plan kitchen and a curved imitation-marble staircase leads up to the first floor where there are three bedrooms, all en-suite.

The master bedroom has a fireplace and a dressing room, while the bathroom has "an open space in case the owners want to install a sauna," he explains.

All that remains is to install surveillance cameras able to read a licence plate before opening the gate, smoke detectors and a security system.

And the price tag? $400,000 (377,000 euros) -- a fortune in a country where the gross domestic product per capita is $565.

"No matter what we build, it will always be too little to meet demand," he says.

But others have spotted the growing demand, with several other sites popping up nearby.

Labour challenge

Since the overthrow of a Marxist junta in 1991, Ethiopia's political and economic situation has stabilised, although rights groups have criticised the government for suppressing opposition.

The economy is still heavily dependent on agriculture, especially coffee, with the vast majority of the country's workers involved in that sector.

Meeting the demand for new housing has called for bringing in foreign workers as Ethiopia lacks a skilled work force.

Haile said his firm recruited around a thousand specialist workers from China.

Yoseph Mebratu, the major shareholder in May Real Estate Development, also complains that he had to import 70 percent of raw materials.

"Windows, doors, wood panelling... everything comes from China," he told AFP, adding that taxes are "very heavy."

Inflation, which hit a record 64.2 percent in July 2008 but has since stabilised at around 13 percent, has also caused delays.

"We had to slow down our business and missed deadlines... but since last year, we have become profitable again," Mesele added.

Real estate expo lacks visitors

The Jakarta Post, Jakarta | Sun, 05/02/2010 3:09 PM

Real Estate Indonesia (REI) Expo 2010 remains unable to lure many visitors on the second day of the exhibition, held in Jakarta Convention Center, Senayan, Central Jakarta.

"I often monitor this expo. But this time, there are not many visitors during holidays and lunch break," Soekarno, a businessman, said Sunday as quoted by kompas.com

The exhibition, which kicked off on Saturday and will last on next Sunday, features residential complexes in Jakarta, Cibubur, Depok, Bogor, Tangerang, Bandung, Semarang, Solo, Samarinda, Balikpapan, and Manado.

RI developers to join FIABCI property competition

Antara News, Saturday, December 12, 2009 22:16 WIB

Jakarta (ANTARA News) - Eight national developers have been selected to represent Indonesia in a world property competition to be held by the International Real Estate Federation (FIABCI).

"We selected eight developers out of 34 nominees for 11 categories," Pingki Pangestu, organizing committee chairman of FIABCI Indonesia - BNI Prix d`Excellence Award, said here on Friday.

The eight developers would take part in the international contest to be organized coinciding with the 61st FAIBCI World Congress to be themed "Save the World: Green Shoots for Sustainable Real Estate", Pangestu said.

Chairman of the Indonesian Real Estate Association (REI) Teguh Satria who is concurrently president of FIABCI Indonesia, said it was about time for Indonesia to be active in international property contests.

Except for Bali, Indonesia was hardly known internationally, he said.

The 61st FIABCI World Congress and the world property contest will be organized at Nusa Dua, Bali Province, from 24 to 28 May 2010.

Indonesia would be hosting the international contest for the first time, while Malaysia had already done so 27 times.

The selected eight Indonesian developers are Bekasi Timur Regency, Jakarta Garden City, Grand Orchard, Apartment

Mediterania, The Pakubuwono Residence, 6. The Residence, Alam Sutera and Gedung Menara Karya.

FIABCI is represented by chapters in 48 countries. It communicates in five official languages, namely English French German Japanese and Spanish.

FIABCI is a non-political entity whose objective is to help its members add an international dimension to their businesses. FIABCI helps members acquire knowledge, develop networks and optimize business opportunities all over the world.

The organization has a business club of real estate professionals in 60 countries and groups or federations of 100 national real estate associations.

FIABCI is special consultant with NGO status to the Economic and Social Council of the United Nations Organization (ECOSOC).

Russian entrepreneurs have a keen interest in Indonesian real estate

Property-report.com, Asia Pulse 

Russian entrepreneurs were reported to have an interest to invest in the sector of infrastructure, real estate and production of health instrument in Indonesia. 

The report on this was exactly the conclusion of a visit by some Russian entrepreneurs grouping in the Russian Academy of Business to Indonesia on February 20 to March 2, a spokesman of the Indonesian embassy in Moscow, M. Aji Surya, told Indonesian correspondent in London on Monday. 

I Oleg Gorbulin, the Director of the Russian National Investment Board who acted as the leader of Russian delegation, said his side would be serious to learn the possibility to invest in the sector of infrastructures as already offered by the Indonesian coordinating investment board. 

"It will not be on the right track if the Indonesian offer is to be ignored," he said. 

Largest and medium scale Russian businessmen were reported to be currently pondering the line of business or investment they had to invest in Indonesia, said Sergey Evdokimov, the manager of medical instruments making company "MedEng" especially in the sector of medical instrument. 

In the meantime, Elena Chepelnikova, the president of Russian Petrobuild holding company, had the interest to make cooperation with his Indonesian partners in the sector of real-estate. 

During their visit to Indonesia, the delegation of Russian Academy of Business had a series of meetings with the Indonesian Chamber of Commerce and Industry (Kadin), the Indonesian Businesswomen Association (IWAPI), the Indonesian Coordinating Investment Board, the Artha Graha Network, Riau Islands Governor and the Batam Industrial Development Authority. 

For most of Russian delegates, this year´s visit is the second one to Indonesia, thus posing a follow up of the last year´s. 

The results of the visit are very satisfactory. Even the world is still grappling with the financial crisis, Indonesia is proven to be able to attract Russian investors, as this world largest archipelagic country can expectedly come up as the center of Russian investment in the future, A.  Agus Sriyono, the Indonesian Vice Ambassador in Moscow, said. 

According to a plan, in April of this year, the delegation of Russian Academy of Business will reportedly visit Indonesia to further discuss more concrete step of cooperation, thus indicating that how big the interest of Russian businessmen to invest in Indonesia is.

Expats hail ownership plan

Prodita Sabarini, THE JAKARTA POST, JAKARTA | Fri, 02/27/2009 2:29 PM 

 

Expatriates living in Jakarta and surrounding areas said they welcomed the government's plan to allow foreigners to own property in Indonesia for 90 years.

 

Currently, the National Land Agency, Home Ministry and Public Housing Ministry are revising a 1996 law on foreign ownership of property. The revision will extend foreigners' utility rights of houses, apartments and condominiums in Indonesia from 25 to 90 years.

 

On Thursday, German national Dieter Speers said he welcomed the plan. Having lived in Indonesia for almost 20 years, he said owning land in the country would definitely bridge the gap between foreigners and locals.

 

"I buy a property to live in. I obey the culture and adjust to the neighborhood," he said.

 

"I'm more likely to be part of the community by owning a house than just renting one apartment and moving the next year."

 

Speers purchased a house in 1999 under the 1996 rules.

 

Speers works in the bakery and cafe business, after serving as a professional chef in five-star hotels in Jakarta. He commutes from his house in Rancamaya, Bogor, to his workshop in Kelapa Gading, North Jakarta.

 

He said the choice to live and have a business in Indonesia was his own.

 

"I'm not married at all. I'm living on my own. I'm very free to move anytime, but I chose to continue to stay here," he said.

 

"Indonesia is so promising, in terms of entrepreneurship and the hospitality of friends is second to none."

 

Another expatriate, Karen Merrick, said that if the plan passed, it would help sustain the economy.

 

"I think the plan would widen the popularity of Indonesia from other countries," she said.

 

Malaysia and Singapore allow expatriates to own property. In Singapore, an apartment would cost Rp 170 million per square meter while, in Indonesia the price is still around Rp 10 to 25 million per square meter.

 

Last week, the chairman of the Indonesian Real Estate Association (REI), Teguh Satria, urged the government to revise the regulation to allow foreigners to acquire 70-year home ownership rights in order to help the economy.

 

Property analysts said that because of the global economy crisis, within two years the property business here would be sluggish.

 

The draft revision reportedly allows ownership rights up to 90 years straight, longer than what the REI demanded.

 

CEO of property giant Agung Podomoro Group, Handaka Santosa, said the government was taking too long to deliberate the regulation.

 

The ministry has been working with the National Land Agency to draft the regulation with input from the Indonesian Real Estate Developers Association since last year. It was scheduled to go into effect by the end of 2008, or early 2009 at the latest.

 

"They should hurry up and not take too much time to pass the law," he said.

 

"The government should be smart in looking for a breakthrough to help the economy," he said.

 

Handaka said opening up the real estate market to foreigners was a good way to attract investment.

 

"Compared to the stock market, real estate is safer, because even though they leave the country, the property is still here," he said.

 

Calls to open up the real estate market to foreigners have been sounded since 2006. That year, REI estimated that the country could reap at least $10 billion in foreign investment in five years should it decide to open the sector.

Expat house ownership welcomed

Benget Besalicto Tnb., The Jakarta Post, Jakarta | Thu, 02/19/2009 2:10 PM 

 

Property analysts welcome plans to allow foreigners to own houses as it will stimulate the property market despite the slowing economy.

 

"It's good news. I think if it is realized it will help stimulate the local market significantly," Djodi Trisusanto, a property analyst with Jones Lang Lasalle, told The Jakarta Post on Wednesday.

 

He was commenting on President Susilo Bambang Yudhoyono's statement that he would ask the National Land Agency (BPN), the home minister and the state minister for people's housing affairs to conduct an in-depth study into granting expatriates home ownership rights.

 

Unlike some other countries, such as Malaysia and Singapore, which allow expatriates to own property, Indonesia still bans such ownership. Based on the 1996 government regulation, foreigners cannot own houses, apartments, and condominiums in Indonesia. They are only allowed to have utility rights up to 20 years and are then eligible for another 20 year extention.

 

During the Tuesday dialogue with the president after the inauguration of 114,000 units of simple low-cost houses in Lamongan, East Java, the chairman of the Indonesian Real Estate Association (REI), Teguh Satria urged the government to revise the regulation by allowing foreigners to acquire a 70-year home ownership right, in order to help stimulate the local economy.

 

"Amid the slowing growth in the property market, allowing foreign ownership will certainly help push up the demand for property here," said Arief Rahardjo, a property analyst with PT. Cushman & Wakefield Indonesia, a property consultancy company.

 

Analysts have predicted that the property market this year will see slowing growth due to the global economic downturn. During the last quarter of last year property sales already dropped by between 10 and 20 percent.

 

But Djodi warned the government should regulate the categories of properties to be opened up to foreigners and the basic requirements for ownership so as to optimize their potential economic contribution.

 

"I think middle-to-lower market properties should not be allowed to be owned by foreigners."

 

"The government should design the foreign ownership regulation so as to avoid any speculative buying by foreigners," he noted.

 

To avoid speculative purchases, Djodi suggested government should make sure that ownership was only granted for permanent residence and not open the market too much.

 

Both Djodi and Arief noted that despite the foreign ownership ban, many expatriates in practice now owned houses, apartments, or condominiums, using loopholes in the existing laws.

 

For example, foreigners can make use of local people to buy a house. Then before a notary they will sign an agreement saying that the local people get a loan from the foreigners at the amount of the house price. And based on the agreement, the loan will be made permanent while the house is presented as collateral which can be taken over anytime.

Summarecon issues bonds for expansion

The Jakarta Post, Thu, 05/08/2008 11:03 AM 

 

Publicly listed property developer PT Summarecon Agung issued Wednesday its first Islamic bonds (sukuk), worth Rp 200 billion (US$21.69 million), and conventional bonds, worth Rp 100 billion, carrying returns of between 13.75 and 14 percent per annum.

 

The bonds, to be offered between June 10 and 12, would have a five-year maturity period and would be listed on the Indonesia Stock Exchange on June 18, President Director Johannes Mardjuki said Wednesday during a press conference.

 

"Around 70 percent of the proceeds from these bonds will be allocated for purchasing land in Kelapa Gading and its surrounding area in North Jakarta and 30 percent for working capital," he told reporters.

 

Corporate secretary Michael Yong said previously the company intended to issue up to Rp 500 billion in bonds.

 

"Since interest rates on state bonds have increased to 12.5 percent from less than 11 percent two months ago, we decided to reduce our bonds to Rp 300 billion," he said.

 

Summarecon has appointed PT Andalan Artha Advisindo Sekuritas and publicly listed PT Kresna Graha Sekurindo to underwrite the bonds.

 

The company's net profit in the first quarter decreased to Rp 36.76 billion from Rp 43.83 billion due to the increasing tax charge, Michael said.

 

In anticipation of increases in the price of construction materials, the company has signed agreement contracts with its suppliers to ensure fixed prices for six months to a year. -- JP/rff

Bumi Serpong Damai announces IPO

The Jakarta Post, Sat, 05/10/2008 10:34 AM

 

PT Bumi Serpong Damai (BSD), developer of the popular satellite city complex west of Jakarta, will sell shares in an IPO expected to generate Rp 872 billion (US$94.42 million) in capital.

 

Director Teky Mailoa said Friday 1.09 billion shares would be sold for Rp 388 to Rp 800 per share between May 28 and 30. BSD will officially be listed on the Indonesian Stock Exchange on June 5.

 

"About 30 percent of the capital raised will be allocated to developing infrastructure in the city, such as roads, water treatment facilities and electricity and phone networks," Teky said.

 

He said another 25 percent of the proceeds would be used to refinance the company's Rp 600 billion bonds, 20 percent for financing the expansion of property projects, 20 percent for buying land and the remaining 5 percent for capital.

 

The issuance of the new shares will be underwritten by PT Sinarmas Sekuritas, PT CLSA Indonesia and PT Nusadana Capital.

 

Teky said by the end of April BSD had recorded Rp 954 billion in revenue this year.

 

BSD City is located on 5,920 hectares of land about 20 kilometers west of Jakarta. The company plans to build 80 housing clusters, seven community centers and an integrated commercial area on the site.

 

Currently there are 4,100 commercial outlets and 20,600 homes with 100,000 residents in BSD.

 

The company is winding up the second phase of 2,000 hectares of land development begun in February last year, said president director Harry Budi Hartanto.

 

It expects to complete the third phase of 2,150 hectares of land development later this year. -- JP/Novia D. Rulistia

Emaar Jakarta tower to be the tallest in SE Asia

The Jakarta Post, Jakarta | Tue, 05/06/2008 2:01 PM

 

Dubai-based real estate giant Emaar Properties plans to build a landmark tower in Jakarta, which would be the tallest skyscraper in Southeast Asia, a presidential envoy says.

 

Special envoy for the Middle East Alwi Shihab said Monday the Chairman of Emaar, Mohamed Ali Alabbar, had proposed the project to President Susilo Bambang Yudhoyono during an informal meeting on Saturday.

 

"At the moment, we're still looking for the right location in Jakarta for the site of the project... we are ready to build the tower, our homework is to find the right location, " Alwi told The Jakarta Post.

 

Emaar, the largest land and real estate developer in the Gulf, is famed for its ongoing construction of Burj Dubai in Dubai, which would be the highest skyscraper in the world. The 718 meter-tall building is scheduled to be fully constructed by the end of this year.

 

Alwi said the Jakarta project was part of the company's commitment to invest in Indonesia.

 

In March, Emaar signed a joint venture agreement with the state-owned Bali Tourism Development Corporation to build an integrated tourism project in southern Lombok, West Nusa Tenggara, with a total investment of US$600 million. During the initial stage, they would build four luxury hotels, including Ritz Carlton and Giorgio Armani hotels, along with related tourist facilities.

 

"Emaar has started building its offices in Lombok and is carrying out trainings in conjunction with the tourism ministry for locals to assist in its projects," Alwi said, adding that up until now, the Indonesian government had received investments worth almost $5 billion from the Middle East and that it was targeting to attract $10 billion by 2009.

 

He said among those committed to invest in the country was Ras Al-Khaimah of the United Arab Emirates, which would bring a total investment worth $1.5 billion to construct an integrated port at Tanjung Api-Api, and a railway line from Palembang to Tanjung Api-Api.

 

Another company, Dubai Drydock, is ready to invest up to US$1 billion for the construction of a shipyard and an industrial city in Batam.

 

The envoy said the company had opened its office in Indonesia and had paid for the project's land, while adding that conglomerate company Pacific Inter-Link planned to invest US$500 million in a palm oil refinery plant in Dumai, Riau.

 

Dubai-based Al Ghurair Group also showed its commitment to invest around $500 million in the renovation and improvement of old refinery plants.

 

Previously, Saudi Telecom Company's Axis invested US$1 billion in the telecommunication industry. Alwi said the investors hoped to fully realize their commitments soon.

 

"Some of them complained that bureaucracy in our country has been too slow in responding to their proposals. While it only takes a few months to manage permits in Malaysia, for example, it could take years in Indonesia," Alwi said.

 

This had caused many of them to invest in Malaysia and Singapore instead, he added. (dia)

Bakrieland expands to infrastructure projects

The Jakarta Post, Jakarta

Publicly listed PT Bakrieland Development is expanding to infrastructure projects, acquiring a 100 percent stake in PT Semesta Marga Raya (SMR) -- the developer of the 35-kilometer Kanci-Pejagalan turnpike.

Bakrieland Development president director Hiramsyah S. Thaib said in a media statement over the weekend that the acquisition, currently being conducted by a subsidiary, would be finalized early March at a cost of Rp 690 billion.

While the company's core business will remain in the property sector, Hiramsyah said, it is now entering the lucrative infrastructure sector -- focusing on toll roads and monorails.

"In the future, we predict the infrastructure sector will be able to contribute between 35 and 40 percent of the company's total revenue," he said.

At Oct. 31 last year, the company's unaudited net profits had reached Rp 88.8 billion, on revenue of Rp 547.7 billion. January-October 2007 profits surpassed 2006's full-year profits of Rp 67.8 billion.

Commenting on the Kanci-Pejagalan project (part of the massive Trans Java scheme), Hiramsyah said SMR had completed all the land-acquisition needed and would soon begin construction.

Bank Rakyat Indonesia and Bank Negara Indonesia have expressed interest in financing up to 70 percent of the project, estimated to cost around Rp 2.3 trillion, he said.

In addition to city residential projects, the company also develops hotels and resorts such as the Legian Nirwana Suites & Residences in Bali.

RI property sector: How robust is the new tax regime?

Andhika Suryadharma, Analyst The Jakarta Post

The tax office has proposed a new tax system for property developers. For some companies the new legislation may prove to be a new year's gift; for others however it may turn out to be a handicap.

The new regulations would impose a 5 percent final tax on revenues for big developers and a minimum 1 percent tax rate for smaller developers. Currently, taxes for property development companies adhere to the corporate tax rate, which is 30 percent of pre-tax earnings.

This proposal may be viewed positively for stimulating the development of low-cost housing. A number of criteria, however, still need to be clearly defined.

The rational behind the new tax legislation is twofold: first it prevents developers from engineering profit numbers to minimize taxes. At present calculations for income and expense directly impact pretax profits.

Second, the new tax law strengthens the incentive for developers to build low-cost housing including apartments, as these projects are likely to be subject to the 1 percent minimum tax.

Low-income housing is generally defined as developments which have a maximum unit price of Rp 49 million. Freehold townhouses may also be defined as low-income provided their sale price does not exceed Rp 144 million.

The 5 percent final tax on revenues imposed on larger developers would be implemented for residential housing sales. The development of commercial properties for the generation of rental income (i.e. hotels, time-shares and other temporary accommodation) will bear a final tax of 10 percent.

Opportunities for confusion and perhaps systemic abuse may still persist under the proposed tax system. At the heart of this matter rests definitions related to scale. What distinguishes a big developer from a small one?

At the moment, the definition of small is not closely associated with low-income housing. If for example, the developer were to pursue a large-scale project to develop low-income housing, the overall size of the investment may outweigh the fact that the per unit cost meets the low-income definition.

Another key consideration is related to the property cycle. Residential property is sensitive to volatility in mortgage rates and purchasing power. This is compared to the more stable recurring income businesses.

The new tax system would provide little security for investors during periods of downward volatility in the property market. In such an event, property developers are left with no choice but to pass on the tax to consumers by increasing the prices of their products.

We try to examine which kind of property developer would benefit from the proposed system. Apparently the property developer with the highest portion of non-recurring business and margins will likely gain the most.

The ability of each developer to maintain margins is crucial. For example, one property developer that we cover would have to maintain its gross profit margin at about 19 percent in order to ensure this regulation.

Our own calculations show that a property developer must keep its pretax margin above 16.7 percent in order to benefit from the new tax regime. Below that margin, the current levy of 30 percent on pre-tax profit becomes more beneficial.

The proposed legislation has actually been in place before. The government implemented a similar law in April 1996, a year before the Asian financial crisis. Despite the ensuing devastation to Indonesia's property market that legislation survived for about three years, being changed in 1999 after the crisis

As the proposed legislation has been initiated by the tax office, there is a good chance it will be implemented this year. Of course it is impossible for tax regulation to satisfy all parties.

However, before this regulation is to be implemented, it is important for the government to clearly classify or define each developer in terms of the scale and location of the products they develop. This will ensure fair treatment for developers.

Furthermore, it is important to consider what will happen during a downturn in the property cycle. Previous mistakes in the real sector need to be avoided.

It is therefore necessary to determine whether it is sustainable for property developers to maintain their margins by passing fixed taxes onto consumers while a property slump is underway?

The writer is a research analyst at PT Bahana Securities

Industrial estate prices 'to remain stable'

Agustina Wayansari, The Jakarta Post, Jakarta

The price of industrial estates is likely to remain stable in Jakarta and Greater Jakarta this year due to slow demand, recent research shows.

"Considering demand is likely to remain slow this year, prices are expected to remain stable at around Rp 554,000 (approximately US$61.5) per square meter," PT Property Advisory Indonesia (Provis) associate partner Arief Rahardjo told reporters Monday.

Citing Provis' first publicized research results, Arief said industrial property in Jakarta was becoming limited and as a consequence industrial estates in Bekasi, Karawang and Purwakarta may develop new clusters expected to enter the market in 2008.

The report said demand for industrial estates after the 1997 economic crisis had slowed, showing a decline since 2006, and may remain weak this year.

The research also indicated the net purchase of industrial land in Greater Jakarta stood at 130 hectares in 2007, down some 32 percent from the previous year at 192 hectares.

"The demand slowed in 2005 with total purchases amounting to 200 hectares, and then declined to 192 hectares in 2006," said Wira Agus, the senior manager for strategic consultancy at Provis.

Arief said industrial land was generally used by automotive and steel-related industries, while industrial buildings were largely absorbed by the logistics industry.

Arief said transactions involving large industrial plots would also remain low in 2008 due to limited foreign investment, while small-scale demand had room to grow.

From 7,800 hectares of available land in 2007, the report indicated that the market only absorbed about 70 percent or 5,500 hectares.

Arief said local investors were likely to remain the main purchasers of land and buildings, followed by investors from Japan, Germany and France.

According to the report, demand for offices increased in the Greater Jakarta area last year, with demand from the telecommunications, banking, finance and insurance sectors the greatest, especially in terms of lease arrangements.

Managing partner David Cheadle said net purchasing in 2007 reached 203,600 square meters, an increase of 63 percent from 124,908 square meters the previous year.

"Most companies have leased the same buildings for some 12 years and now they want to move to better offices. Some companies may also be looking for new places due to business expansion," said Cheadle, adding that it was the right time for businesses to relocate as there were many Grade A buildings in the market.

As of December 2007, Provis reported that cumulative demand for office properties in the Central Business District (CBD) reached 2.9 million square meters, with an occupancy rate of 85.2 percent.

The report indicated that cumulative supply stood at 3.42 million square meters and the total net take up for CBD offices stood at 203,600 square meters over the year, which is the highest figure since the economic crisis in 1997.

Cheadle said the rental rate was relatively stable in the fourth quarter last year, standing at Rp 129,665 per square meter. He said the rate would most likely increase in 2008 as most landlords had decided to raise base rental and service charges by between 5 and 10 percent.

As safe as houses? Dutch history suggests not

Sat Jan 26, 2008 8:32pm EST

By Emma Thomasson

AMSTERDAM (Reuters) - The house sugar merchant Cornelis Sasbout built in 1617 at number 150 on Amsterdam's Herengracht canal tells a cautionary tale about investing in property -- prices fluctuate wildly, but are ultimately flat.

From boom to bust, the plot Sasbout bought for 4,600 guilders (2,100 euros) and which today might sell for several million euros on the prestigious canal, will in the long run always revert to some kind of price equilibrium.

This can be seen in a unique index dating back 350 years, drawn up by Piet Eichholtz, a real estate professor at Maastricht University using records of house prices on the canal. Even for people with no intention of buying property, it has been cited by Yale economist Robert Shiller for its reflection of the inexorable logic that bubbles always burst.

Just now for Eichholtz, the arrow is pointing down. He says home-owners worldwide may need to brace for double-digit losses in once-booming markets, and even more in places with low birth rates like eastern Europe as well as Japan and South Korea.

"I'm really concerned about housing markets where the demographics look bad," he said. "Then prices can really fall a long way."

His Herengracht index came to prominence in 2005 when Shiller, whose book "Irrational Exuberance" forecast the 1990s stock market bubble would burst, picked up on it as an ill omen for the U.S. house market.

Shiller and fellow economist Karl Case did the pioneering research in the 1980s that produced the S&P/Case-Shiller index of the U.S. housing market which has shown big recent falls.

Eichholtz says what makes his index stand out from house price histories in other cities is what he calls "constant quality" -- the Herengracht has always been prime real estate. The index corrects for rising consumer prices but not wages.

Read More ....

RI property industry predicted to grow at 5-10 pct only in 2008

Jakarta (ANTARA News) - Developers said that property industry in Indonesia was predicted to grow at 5 to 10 percent in 2008 only due to market uncertainty and various economic turbulences at home and abroad.

"The property industry is predicted to grow at five to ten percent only due to economic turbulences at home and abroad," Johannes Mardjuki, president director of PT Summarecon Agung Tbk, said here on Saturday.

The global turbulences as a result of the United States subprime mortgage and European financial crisis would affect the world`s economic growth.

He said that the sluggish world economic growth was believed to have impacted the Asian region, including Indonesia which was forced to revise its economic growth target at over six percent.

Mardjuki said that the US and European financial crisis could, however, be balanced by the high growth in China and India which grew over ten percent, thus still allowing the Asian market to grow well.

He said the increase in the world`s crude oil price which happened to reach US$100 per barrel some time ago also raised concern, though it had returned to US$80 per barrel now.

The increase had created a deficit in the government`s expenditure budget.

Therefore, developers were still cautious in setting a growth target in the property sector because the market situation was uncertain, he said.

Despite infrastructure, CBD still good property investment

The Jakarta Post

Andhika Suryadharma, Analys,

For the average Indonesian, prices of land in the Jakarta CBD already seem sky-high. However, they are relatively cheap compared to other CBDs in the region, and there is potential yet to be unleashed.

We are at the start of 2008, a year most market analysts regard as likely to be a turbulent one. With a slow-down in the world's major economies forthcoming, emerging markets may become a safe haven. So why not invest in emerging market property?

To get a feel for the land situation in Jakarta from an international perspective, consider property prices in the CBDs of other major Asian cities.

According to the latest Asian property report from Jones Lang LaSalle, Tokyo's CBD holds the most expensive price per square meter among Asian countries, going for as much as US$34,000 (approximately Rp 310 million) per square meter.

Among cities in developing countries, the report puts the price of CBD land in Chengdu at $1,380, Delhi at $7,426, Bangkok at $2,513 and Makati City at $1,655.

Where does Jakarta fit in? Jakarta CBD is the cheapest of them all, at $1,340 (approximately Rp 12 million) per square meter.

Last year, the CBD in Jakarta experienced only a 3.1 percent year-on-year increase in prices, below Bangkok, which experienced a 3.5 percent gain, Delhi (72 percent) and Makati City (19 percent).

It is interesting to note that land in the CBDs of the latter two cities has a higher capital value than land in Jakarta, while Indonesia ranks higher than both the Philippines and India in GDP per capita (based on recent ADB data). This raises some questions about what factors determine the property value of CBDs.

Location, certainly, is among the main factors. The closer an area is to the center of day-to-day activity, the more expensive it becomes. However, that alone does not determine the price of capital value.

There are also factors such as supporting facilities, which involve accessibility to the CBD area. Examples are the CBD areas in Singapore and Hong Kong; one reason those areas are among the most expensive in the world today is the transportation facilities they offer.

You can easily reach the CBD in both cities using a variety of transportation modes, including Mass Rapid Transportation, buses, taxis, and even by bicycle or on foot. It is comfortable to get to your office by foot in Hong Kong, and it is also safe.

Another factor is tenants. Most of the high-ranking CBD areas are filled with major financial institutions and multinational companies. In Hong Kong, for example, major banks and brokerages line the Hong Kong area where the stock exchange resides. The more exclusive the area becomes, the higher the value of the land.

So what is the Jakarta CBD lacking? The tenants here are prestigious enough; it's the facilities that fall short. In terms of transportation, the busway is a good start but obviously it's not enough; a city railway system is also needed to build a transportation system accessible to everyone, in which safety for commuters is a priority.

Apart from that, there are also risks in obtaining land. Besides the difficulties in land clearance, the licensing of land ownership has been an issue, given the many reported cases in which more than one certificate is issued for a single piece of land. Hence there is the need to reduce regulatory uncertainty in order to make investments in CBD property less risky.

So, all in all, is land in Jakarta a good investment? We would say yes. Obviously a lot needs to be done, and this will need time. Transportation facilities should be upgraded, clogged traffic should be relieved and land ownership uncertainties should be minimized.

But land here is still cheap relative to the region, and with economic growth at above 6 percent and reforms underway, Jakarta should eventually catch up with other Asian cities in terms of capital values.

The writer is an equity analyst at PT Bahana Securities.