Construction & Real Estate

Much of Indonesia’s construction sector is awaiting the unveiling of major infrastructure projects that will be necessary to unlock the high growth potential of the domestic market. The government has pledged to spend $150bn on infrastructure projects over five years in its 2011 budget, but sector figures are looking to see results, not just promises. The industry grew at 5.3% in Q1 2011, representing a slowdown from 2009, which reinforces uncertainties about material costs, legal issues, and bureaucracy-related project delays. Real estate, meanwhile, has a bright future, highlighted by surging demand and good value but undercut by potential bureaucratic bottlenecks. Interest rates have fallen below the 10% level, offering a record number of Indonesians the chance to buy their own home. Developers have not yet shown much interest in building low-cost housing, which is still the largest source of demand, primarily because margins are low. Reforms that would help the sector include more support for low-income housing, as well as a potential loosening of laws that currently restrict foreigners from buying real estate in Indonesia. This chapter includes interviews with Muktar Widjaja, Chairman, Sinarmas Land; and Trihatma K Haliman, President Director and CEO, Agung Podomoro Land.