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Is now the right time for developers to start investing in Transit Oriented Development?

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Today, infrastructure development is growing rapidly in Jakarta and its surrounding cities. It can be seen from the development of mass transportation developments such as Light Rail Transit (LRT), Mass Rapid Transit (MRT), and the quality improvement of the Electric Trains (Commuterline) which are very supportive for the regional and urban development concepts that are integrated with mass transportation networks.

Transit Oriented Development, or TOD, is a regional development concept that focuses on the integration of rail-based, mass-public transport networks and non-motorized transportation modes. Therefore, the concept of TOD development is very concerned about aspects of human convenience and comfort of mobility, such as walking or cycling.

The use of the word TOD in marketing a property often becomes a gimmick used by developers when selling residential products near KRL, MRT or LRT stations. This gives the community a limited understanding, as it interprets the TOD concept as just a property that is developed adjacent to transport stations.

TOD development has a broad concept, which is not just the development of one, single function. Rather, it is about the development of a compact mixed-use area that has various functions, such as residential, commercial, public open space, recreation, health facilities and schools.

The Regulations

The guidelines regarding TODs are regulated by a ministry/head of BPN (national land agency) Nomor 16 tahun 2017 tentang Pedoman Pengembangan Kawasan Berorientasi Transit. This regulation was issued in 2017 and outlines regional regulations. For the DKI Jakarta province, the Jakarta regional government has issued regulations for the development of TODs.

In its application, an area can be declared as a TOD area after it is zoned/spatially determined by the government, which also refers to the regulation by a ministry/head of BPN (national land agency) Nomor 16 tahun 2017 tentang Pedoman Pengembangan Kawasan Berorientasi Transit, Bab 1 Pasal 1.8. In a TOD area, such as in Jakarta, there is a designated area management agency (Badan Pengelola), with which the land owner/developer coordinates activities when developing the TOD area.

There are several challenges when developing TODs in Indonesia, such as:
• Location aspect
We can see that many TOD areas are located in a mature or developed areas, so they will need an in-depth study to be able to implement the new concept of TOD.
• Regulations perspective
In Indonesia, we are still in the process of improving the regulations to make them ideal. When drafting the regulations, the government also faces many challenges related to its obligation to involve various related agencies/departments when drafting such regulations. For illustration, when the government wants to widen the sidewalks, the government needs to coordinate with various agencies, such as the Highways Agency (Dinas Bina Marga), Ministry of Public Works and Public Housing, Park and Cemetery Agency (Dinas Pertamanan dan Pemakaman) and National Electricity Company.

The ideal TOD and its benefits

A TOD area can be said to be an ideal TOD development if access from and to the mass transportation node can be reached by walking or cycling for approximately 10-15 minutes (400-800 metres), and it must be well connected. The ideal TOD area pays attention to comfort for all communities such as the elderly, pregnant women, children and also persons with disabilities. In terms of property development, it must be multi-functional and integrated.

• Benefits for developers, investors and property owners
Colliers sees that the TOD area has enormous potential compared to the non-TOD area. Not only from the ease of access to transportation stations, but also as an designation for increasing the intensity of space utilisation in the form of easements to maximise the building’s coverage ratio (koefisien dasar bangunan) as well as the plot ratio (koefisien lantai bangunan). These ratio incentives can be obtained by developers when developing near the TOD area.

Moreover, the product development in the TOD area should have stronger demand. From the investor side, it can present an attractive captive rental market for apartments or commercial use. Another positive outcome for property owners when developing the TOD concept in the area or nearby, are higher property values compared to non-TOD areas.

• Benefits for occupiers
Generally speaking, the benefits of developing future TODs for the community are the reduced use of private vehicles, thereby reducing congestion and pollution. People living and working in the TOD area will have easy access to work, home and activities.

By easily reaching activity centres via walking or cycling, a healthy lifestyle will be formed, whereby the walking culture and active living becomes a new lifestyle.

In closing, Colliers sees that the TOD concept will help to answer some problems in cities such as Jakarta and other big cities in Indonesia, and the development product in the TOD area should have good demand from residents and property investors. Lately, we have observed more inquiries coming to Colliers Capital Markets and Investment Department from both landowners looking for partners to develop TOD sites and developers/investors specifically seeking to identify investment opportunities for property development in and around TOD areas.

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Steve Atherton

Director

Capital Markets & Investment Services

Jakarta

Originally from Los Angeles, but now living and working in Asia for over 25 years, Steve's background includes Office Landlord Representation & Tenant Representation, Office & Residential Development, Management over Asia Pacific region for a major global real estate company where he also served as functional head over Investment Services & Capital Markets for over 10 years.

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Ringkardo Goratama

Assistant Manager

Capital Markets & Investment Services

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Kardo has over 15 years’ of experience in the real estate field specializes in advisory and property valuation. As a member of the Investment Services team, he focuses to support the team for property assessment covering all major sectors including residential, commercial, retail, industrial, hospitality and leisure.

Before joining Colliers International, Kardo was the Valuation Technical Manager at KJPP MSS, Kardo primary responsible to ensure that the Valuation report provides is accordingly to current standard, consistent and meets both external and internal requirements. He also responsible to providing Feasibility Study, Highest and Best Use Study and also Project Monitoring Report.

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