An insider perspective to real estate & property investing in Indonesia
Indonesia accounts for some 40 percent of the total Asean population which is approximately 600 million. With an overall population of 260 million people in the Indonesia archipelago, financial researchers and market analysts are confident that the economic market in 2017 will continue to grow despite a prevalent or widespread property downturn within the region last year. The Indonesian property market in particular has rebounded from a temporary slump in 2016 due to the tumbling global oil prices, registering a GDP (i.e. gross national product) of a strong five percent which is one of its best economic performances during the past decade. In an exclusive interview with Homefinder Malaysia, we had the opportunity to speak to Rusmin Lawin who is one of the top icons and major heavyweights in the arena of Indonesian real estate. He is an avid investor and a property guru, as well as an outspoken industry leader in FIABCI and REI.
He shares his personal views and professional perspectives regarding investing in Indonesia by providing invaluable tips and advice to prospective investors who are keen to invest in Indonesia. Indonesia’s property outlook in 2017 has been forecast to be potentially bright with untapped opportunities and unlimited possibilities. Hailing from Medan, Sumatra, he firmly believes in sharing his vast knowledge and in educating the public about property living and the essence of homeownership. He also aspires to impart his lifelong experience in property matters, and to assist the Indonesian government in formulating policies deemed positive and beneficial to the local property industry. The following is a brief excerpt to the interview itself.
First and foremost, kindly introduce yourself, and give us a brief overview of your company and portfolio, as well as your past accomplishments if possible.
My company is known as Felixindo Artha Kenchana (“Felix Land”), and I have been partnering (non-executive associate) with my other business associates. As I only hold equity shares, I do not personally run the company myself. Since I am now with Fiabci Asia Pacific, and REI (i.e. Real Estate Indonesia) as per my role in its foreign affairs, I believe the time is ripe and now to share my knowledge and my experience on how to enhance and tie up with more cost effective and prudent investments within Asean countries. At present, my company is undertaking various commercial projects as well as residential developments within the major cities in Jawa and Sumatra. We also have one upcoming tourism project in Bali which is awaiting government approval, and is due to be launched soon. Recently, I have also set an Investment Advisor Firm to assist some of my international investors to invest in ASEAN countries, especially into Indonesia and Malaysia markets respectively. My other major roles in FIABCI and REI is also to encourage and boost cross-border investments within the Asia-Pacific nations.
Ushering in the New Year, what are the fundamental trends or happenings in Indonesian real estate, as well as the local property market outlook in 2017?
If you view the whole picture of Indonesian property market, you may witness the mind-boggling backlog of almost 11.2 million unsold houses! This housing glut in Indonesia is compounded by technical challenges such as land banks, technology and financing. The scenario in Indonesia is somewhat similar to Malaysia as both nations are essentially facing identical problems. In addition, Fiabci Asia-Pacific has come up with a campaign entitled “The City Must Be Affordable” – the aim or objective of which is to discover a formula for property development to keep up with demand from property investors and home buyers. Ironically, the inevitable urbanization has led to more and more people migrating to the cities to live, work and play. Proper living always begins with affordable housing. Incidentally, my role in REI also complements my quest to realize affordable housing for the masses, with undivided & unequivocal support from investors within Asean itself.
If affordable homes are abuzz in Malaysia these days, how would you portray the residential landscape and urban homeownership scenario in Indonesia today? What are the key or vital challenges faced in the Indonesian market?
We are still doing our best to work with Government to come up with market-friendly regulations pertaining to property investments. Recently, Indonesian President Jokowi (Joko Widodo) has approved a new formula for foreign home ownership. Now we are striving for better residential packages for citizens, much like what Malaysia has been doing with its My Second Home, as well as Philippines with its Filipina Retirement Board. Foreigners who purchase houses in Indonesia are automatically eligible for visa. Among the happening places for owning an Indonesian dream home is none other than Greater Jakarta which mirrors that of Greater Kuala Lumpur. Other cities such as Surabaya and Medan also offer similar opportunities for ideal living in a suburban setting with countryside ambience.
Strategically located within the region encompassing Singapore, Thailand and the Philippines, these cities are geographically connected for ease and accessibility for optimal travelling and trading convenience. In fact, with so many upcoming local townships and estate developments in progress, the so-called ‘rural cities’ have been mulled and earmarked to be the next international hubs for regional property. Medan, located in northern Sumatra is a prime example of a thriving and prosperous city of SMEs with its many cottage industries and community products. Meanwhile, Surabaya is affluent with a myriad of commercial activies and eco-tourism, much like the island of Bali. Of course, Java will always be seen as the undisputable property hotspot and nerve centre of the national economy.
Can you elaborate on the various steps and measures taken by the Indonesian government to spur and encourage homeownership among its citizens, as well as what engages the local population? What are the solutions and benefits?
Affordable housing is definitely one of the fundamental issues as well as matters of interest facing the global population today, particularly within Asian countries in the Asean region comprising such countries as Malaysia, Singapore, Indonesia and the Philippines. Indonesia is no different, as at the moment, its people also encounter similar problems with owning a first home. The federal government currently embarks on a low-cost housing subsidy programme which helps assist and alleviate the burden of low-income house buyers by means of providing home financing, rebates, allowances, as well as subsidies on mortgage loans. The government-subsidized financing scheme allocates a nominal five percent interest, whereas the present market rate for conventional financing stands at some 10-12 percent which is exorbitant for general populace. Such subsidy schemes also go a long way towards realizing the dream of prospective or would-be home owners. It also encourages more homeownership among Indonesians.
Moreover, this also creates a climate or atmosphere which is rather conducive to spur foreigners to invest in Indonesia, specifically in the areas of residential properties and commercial real estate. With greater capital investments from overseas, the accompanying technology influx also plays a crucial role in capturing business leads and golden opportunities, as well as maintaining a sustainable and mushrooming property market. A good financing scheme or initiative serves to benefit the growing population, with ever increasing demands for local residential as well as commercial properties. The Indonesian government does not however subsidize property developers directly, but the subsidies are channeled directly to home buyers via Indonesia’s property bank which is Bank Tabungan Negara (BTN).
In light of the booming local real estate and property sector, will ordinary Indonesians be able to take advantage of the thriving urban property market, particularly in metropolitan Jakarta whereby the market is almost saturated?
Last year in 2016, in spite of countless challenges in regional property markets, the local real estate scene continues to be buoyant. With an ever growing demand for properties, developers continue to do brisk business. Real estate in the residential sector ranging from Rp300k – Rp1mil is perceived as viable pricing for existing properties. During the booming years of 2013/2014, developers often make handsome profits off their projects, especially within the luxury residential segment, whereby high-end condominiums and posh apartments were selling like hotcakes due to their affordable pricing. The Government has also launched several stimulus programmes to encourage homeownership, which enable house buyers to take advantage of the general reduction in housing down payments, albeit from 20-30 percent to about 15 percent. Affordable housing requires only around 1-5 percent of down payment to meet the S&P (i.e. sales and purchase) criteria for owning a low-cost home. Also, the current tax relief implemented by the federal government will witness a significant or substantial impact upon local real estate in the upcoming third-quarter of 2017. This certainly augurs well with the property sector as well as the overall residential market. Income tax will also see a sharp reduction from some five percent to merely 2.5 percent. Tax reforms and stimulus packages also make quite an impact on the local property industry.
Looking forward post-2016, what are your hopes, dreams and aspiration with regard to the future of real estate within this region, specifically in your own homeland of Indonesia? What are some mainstream projects undertaken?
According to a survey conducted recently, the residential sector still contributes roughly forty percent of the overall Indonesian property market, with prime real estate seen as among the fastest growing segment within the residential property market. The real challenge lies with the respective authorities, both governmental as well as professional, on how to exploit & expedite residential real estate as a primary locomotive or engine of growth within the local property industry. With some 180 downstream industries associated with the residential sub-sector, it is little wonder that the Government is all too eager to capitalize on the growth factor in spurring & sustaining the local economy. The property industry is indeed a labour-intensive sector to begin with, notwithstanding the job opportunities it creates or generates. Once the property industry starts rolling its ball, every other secondary or supplementary industry will follow suit, just right behind its tracks. Major developments are generally focused or centred upon metropolitan areas as well as major cities in the vicinity and neighbourhoods. Prime examples include Medan, Bandung, Surabaya, Jakarta, Jogjakarta, Denpasar, Lombok, and Bogor.
What is your best advice to those who wish to embark on property investing in Indonesia, especially in niche residential properties and other luxury segments?
Potential investors can of course invest in retail and buy properties, or they can participate as real estate developers and build properties. Naturally, embarking on property development requires huge capital investments. Fortunately, we do have governmental agencies facilitating prospective developers in undertaking projects within urban townships and city centres. Such capital & labour intensive ventures also require massive funds and enormous amounts of FDI or foreign direct investment, in addition to specialized talents and dedicated technologies needed to implement and to sustain a business or an enterprise of developing properties. Foreign retail investors are also capitalizing on the growing property market, with added tax incentives and other government subsidies, by buying up high-end homes and residences, as well as other luxury & lucrative properties for the primary intent of speculation and profiteering. Upcoming commercial projects within urbanities and city enclaves present an appealing & attractive proposition for such investors too. Nowadays, commercial business districts are gaining much attention and mainstream popularity due to their low rentals and high take-up rates. Typical rental yields start upwards of ten percent or more for most CBDs.
Last but not least, what is your general impression of the property scenario or landscape, as well as the market outlook for 2017 in Indonesia and Malaysia?
We must see where the government policies are headed with respect to property development in the cities as well as metropolitan areas such as Jakarta. We must also try not to put excessive or too much emphasis upon development in Jawa alone, as the island itself is already matured and overdeveloped. Most of the residential and commercial developments in the city centre are way past their maturity and their rental yields are also reaching saturation point. Generating the demand for niche properties as well as maintaining the momentum for residential development in the luxury property segment. Essential elements of accessibility and connectivity are also important issues in spearheading future developments for further growth. Just as with Indonesia, Malaysia is also saddled with similar setbacks and hiccups in the property industry. Housing associations such as REI and REHDA need to work closely with government agencies in order to streamline the various policies as well as the numerous groundworks associated with the implementation of those policies. Coordination is also a key factor towards the success of any organization or its projects, and depends on the close coordination between staff, the departments and their stakeholders in ensuring sustainability.
ABOUT RUSMIN LAWIN
Rusmin Lawin , born and raised in Medan, in May 1971, holds various key posts in business, political and social organizations. He is recognized as one of the most respected young leaders within Indonesia and also the ASEAN region. He is the President of Indonesia Entrepreneur Association (APINDO), Medan from 2014-2019; President of Real Estate Indonesia Northern Sumatra (2008-2011); Secretary-General of FIABCI (International Real Estate Federation)Asia-Pacific Regional Secretariat (2012-2018). In June 2013, he was awarded as “The Most Phenomenal Young Figure” who actively promotes ‘Indonesia Real Estate: The World’ campaign by Property and Bank Magazine 2013 for his role as its ambassador. Since 2014, he has dedicated himself as Special Advisor for Economic Affairs at House of Senate of Republic of Indonesia.
Special advisor for Economic Affairs at House of Senate of Republic of Indonesia.
Chairman of Coordinating Board for Acceleration of Maritime Development, Medan City Government.
International Investment Advisor of Special Economic Zone Sei Mangkei , Northern Sumatra, Indonesia.
Graduate of Law School, University of North Sumatera, Indonesia 1994.
Candidate of Master of Public Notary, University of North Sumatera, Indonesia.
Objective: “I am willing to give total support the organization that I am in, with the experience and
capability that I have, in order to achieve organization’s goals and create mutual benefits.”
Key Skills: Entrepreneur background, motivation, organization and leadership.
Lingual Skills: English, Indonesian, Mandarin, and Cantonese. among others.
INTERNATIONAL BUSINESS ORGANIZATIONS:-
Regional Chairman of Indonesia-Hong Kong Business Association (IDHKBA ) NORTHERN SUMATERA REGION (2016-2021)
SECRETARY GENERAL of FIABCI International (International Real EstateFederation)
for International Organization Committee 2013-2017(Paris, France)
SECRETARY GENERAL of FIABCI ASIA PACIFIC REGIONAL SECRETARIAT 2012-2018(KualaLumpur, Malaysia)
Committee Member of IMT-GT (Indonesia ,Malaysia and Thailand- Growth Triangle),Sub-Region
Cooperation of ASEAN, KADIN (Charmber of Commerce and Industry) Northern Sumatera 2012-2017
Sister City Association of Medan, China Committee 2013-2018
LOCAL BUSINESS ORGANIZATIONS:-
President of Indonesia Employers Association (APINDO) Medan 2014-2019
Vice President of CENTRAL EXECUTIVE COUNCILOF REI (Real EstateIndonesia) for Foreign Affairs 2016-2019
Deputy Secretary General of CENTRAL EXECUTIVE COUNCIL OF REI (Real Estate Indonesia) for Foreign Affairs 2010-2016
President of REI (Real Estate of Indonesia )Northern Sumatra 2008-2011
Vice Chairman of Medan Chamber of Commerce and Industry (KADIN MEDAN ) 2003-2013
Secretary General of APEGTI (Indonesia Sugar and Flours Entrepreneur Association) Northern Sumatra 2008-2013
The Most Phenomenal Young Figure Who Actively Promoting Indonesia Real Estate To The World By
Property And Bank Magazine ,June 2013 Awarded By : Senior Coordinating Minister for Economic Affairs, Hatta Rajasa.
1. Co-Writer for CROSS BORDER REAL ESTATE by Ho Chin Soon Research, Malaysia.
2. INDONESIA REAL ESTATE: THE GIANT AWAKENS by Rusmin Lawin, Indonesia.
(COMING SOON in Bahasa Indonesia, English, Mandarin , Japanese and Korean)