JAKARTA (TheInsiderStories) – Indonesian conglomeration PT Astra International Tbk (IDX: ASII) has expanded its ownership of property through subsidiary company PT Astra Modern Land (AML), a joint venture established by PT Astra Land Indonesia (ALI) with PT Modernland Realty Tbk (IDX: MDLN) from an initial 50 to a current 67 percent. This move is considered to underline the seriousness of Astra expanding into property.
Astra Land and Modern Land signed an agreement on Sept. 8, 2017, in the form of an Amended and Restated Conditional Land Transfer Agreement and Conditional Share Subscription Agreement, according to an Astra report to the Indonesia Stock Exchange on Tuesday (12/9).
Last year, PT Astra Land Indonesia, a subsidiary of Astra International and Hongkong Land Group Ltd., together with PT Mitra Sindo Makmur (a subsidiary of Modernland Realty) formed a property joint venture. The share ownership composition of the joint venture owned by Astra Land and Mitra Sindo Makmur balances out with each holding 50 percent.
The joint venture acquired a land bank and developed a township housing area of approximately 70 ha in East Jakarta, paying some Rp 3.4 trillion for the land plot.
Astra Land Indonesia, established in Oct. 2016, is a joint venture between Astra International and Hongkong Land, with 50 percent share composition. Hongkong Land is a member of the Jardine Matheson Group and a leading property group engaged in investment, management, and development, based in Hongkong and Singapore.
Astra Land Indonesia is the vehicle for residential project in Astra Property Group. Current business portfolio covers a township project undertaken together with Modernland Realty, under the management of AML.
In the future, PT Astra Land Indonesia will potentially pursue other residential projects, such as housing developments, apartments, public facilities, and open areas for the public.
After its success with the sale of Anandamaya Residence in Jakarta City, Astra Modernland plans to build residential and apartment areas in East Jakarta, and another apartment area at an unspecified location in Jakarta.
The project in Cakung, East Jakarta will include residential areas and apartments on an area of 100 hectares, and is intended for the middle-to-lower market. 70 hectares will be allocated for commercial areas and the remainder for other property development.
The first phase of this will involve an investment of Rp4 trillion dedicated to land investment and working capital. Development will begin after launching at the end of this year, likely in 2018. A road network and marketing office have already been built. It is estimated that overall construction will cost around Rp 20 trillion and take 15 years for completion.
Sinarmas Transfers Assets to BSD
Another property player PT Bumi Serpong Damai Tbk (IDX: BSDE) has enacted an asset transfer from its affiliated company, Singapore-based Golden Agri Resources Ltd. The transaction was conducted through Golden Agri subsidiary PT Purimas Sasmita, and a subsidiary of BSDE, PT Duta Cakra Pesona.
Purimas transferred all rights and obligations of Sinarmas MSIG Tower to Duta Cakra. This asset is a 36,874.49 square meter property building with 23 floors, located in South Jakarta.
The total transfer value of this asset reached Rp 1.4 trillion, equivalent to US$107.5 million. The transfer value of this asset represents approximately 2.76 percent of Golden Agri’s net assets of $3.88 billion.
Hermawan Wijaya, Director of BSDE, reported in an announcement to Singapore Exchange Limited on Monday (11/9) said, that the asset transfer agreement will have a positive impact on BSDE’s performance over the long run.
Duta Cakra is a wholly-owned subsidiary of BSDE, while Sinar Mas Land Limited is listed on the Singapore Stock Exchange and holds a 48.41 percent stake in BSDE. The Widjaja family is the majority shareholder with 70.28 percent of Sinas Mas Land Ltd. shares.
Property Goes Wild, Calms Down Suddenly
According to a JLL report, “Globalisation and Competition: The New World of Cities”, the Indonesian economy in general has been making strong progress and has been attracting a great deal of real estate investment. The report says the city’s middle class continues to expand, which carries major implications for the growth of the retail sector, and the demand and supply for different kinds of space.
Economic reforms such as those promised by President Widodo have also helped Indonesia’s property market. This has certainly led to a number of foreign investors to begin to look at Indonesia seriously.
The Indonesian government has done its bit to make it easier for foreigners to buy residential property in the country. A number of laws have been brought forth to make home ownership less restrictive for foreigners – with the exception of land ownership, which is still restricted to Indonesian citizens.
However, these laws only apply to luxury homes that cost over 10 billion rupiah, or $723,000, as there seems to be a huge demand for luxury homes in Indonesia. The government has thus introduced a new super luxury tax of 5 percent to exploit this development.
“It will be a great move if it happens. It will open up real estate investment, allow local property companies to access the equities market, increase cash flows, enable foreign investors to enter the market without having to navigate complex ownership rights and offer good liquidity in the market.”
According to the report, the housing market in Indonesia may go through the same cycle as China, which has entered a mature phase at present, as sales have bottomed out and competition is higher than ever. This has led to a rapid consolidation of the market, which is why the property market in China is heading towards a period of stabilization.
Standard and Poor’s expects a similar phenomenon to take place in Indonesia.
Writing by Linda Silaen, Email: email@example.com