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Projected opportunities for property investment driven by Indonesia’s toll road construction in 2021

The government is targeting the completion of 14 toll roads by the end of 2021, including the Trans Sumatra and JABODETABEK sections.

1. As a result of the developments that the government is pursuing this year, what opportunities do Colliers consider will arise in the property sector in the next few years especially for the Trans Sumatra sections?

Taking into account the situation in Java, the operation of toll roads should trigger property developments along the route, especially industrial and residential developments (which are then supported by commercial developments). Hence, it is projected that the opening of the Trans Sumatra toll road will also trigger a growth in property developments along its length.

The Trans Sumatra toll road will connect all eight provinces on the island of Sumatra, from Aceh in the north to Lampung in the south (the main toll road and supporting toll road). As of Q1 2021, Agriculture was the major economic sector in the eight provinces, contributing 22% to 32% of GDRP in each province, except for South Sumatra.

After agriculture, trading has become the major economic sector in six provinces, providing 11%-19% GDRP in each province. Manufacturing is the major sector in four provinces, accounting for 20%-28% of GDRP. Mining is the major sector in three provinces, contributing 13%-20% of GDRP. Looking at the economic structure in Sumatra, industrial estates supporting agriculture and mining are likely to become the major type of property growth along the Trans Sumatra toll road.

The toll road should also ease accessibility to properties, and the unique and varied tourism destinations throughout the island. Hence, the tourism and hospitality sectors should also grow with the operation of this toll road.

The growth in the industrial and hospitality sectors should, in turn, become a magnet for the development of residential, commercial and other supporting facilities, including education and medical facilities.

By completing the development, it is hoped that the economic turnaround will be faster and bigger, especially in relation to exports and imports and the large investment value of industrial estates. As for the tourism sector, it is hoped that there will be an improvement in visitor numbers growth, while in the residential sector, the need for housing will hopefully be increasingly fulfilled, and transaction numbers will turn positive.

2. To minimize mistakes in the future, what do developers need to do to ensure industrial estates are properly integrated with infrastructure?

As a developer, the most important thing to have is proper and valid access to information related to the mapping of the infrastructure that will continue to be built and developed in Indonesia. The location of infrastructure indicates the greatest potential for future development, so it is important to carry out detailed and accurate feasibility studies to ensure there are no miscalculations in the preparation and progress of projects.

The map of infrastructure development must always be followed closely so that when there is a change of any kind, a developer can be swift in instituting alternatives or formulating the right solutions.

3. What are the projections for the investment climate in Indonesia and the development of the property sector in the near future?

To make projections for 2022, we have to see what level of development progress is targeted for completion this year. Although the government is now quite focused on attracting foreign investors, it seems that the domestic market will continue to dominate, at least in 2021. The role of the domestic market remains very important in infrastructure development and other supporting factors in Indonesia.

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