Wed, 09 Jul 2008
The Jakarta Post, Jakarta

Foreign investors are wary about investing in the Indonesian real estate market due to a low level of information transparency and restricted access to the market, a report says.

Indonesia ranks 55 of 82 markets surveyed in 77 countries for the Global Real Estate Transparency Index 2008, prepared by the service firm Jones Lang LaSalle and its global real estate investment management subsidiary LaSalle Investment Management.

"If a company wants to enter the Indonesian market, the first thing it needs is information. But here, information is very hard to get," said head of research Anton Sitorus.

The market data is never specific enough and is not yet available to the public.

"We do not even have figures to tell us the size of the property market and the current level of foreign investment," he said.

Investors also find it hard to get reliable performance reports from companies, even those few listed on the stock market.

"Many property companies are controlled by families. The reports may represent specific interests rather than real market conditions," he said.

Some examples of family controlled local property giants are Lippo Karawaci Tbk controlled by the Riady family, Bakrieland Development Tbk by the Bakrie family and PT Ciputra Development Tbk by the Ciputra family.

Weak law enforcement is another hindering factor.

"If there is legal conflict, the legal process still involves bribes and corruption. Foreign investors are often being disadvantaged, so many choose to wait on the sidelines until they perceive that the situation is conducive enough," Anton said.

Although transparency is a tool for investors to weight up their options, he said, it is not the only determinant of where the money will land.

A Muslim-majority country like Indonesia, along with Malaysia, has attracted more investors from Middle East countries in the past two years.

Dubai-based company Emaar Properties invested US$600 million on a resort project on Lombok last year.

Another Dubai contractor, Limitless LCC, is collaborating with Bakrieland, which it has a 30 percent stake in, on a $800 million superblock, called Rasuna Epicentrum, in Jakarta's Central Business District.

"Investors from the Middle East are more flexible than their Western counterparts. Perhaps it comes down to cultural and religious similarities," Anton said.

Transparency also is less of a concern when the return is high enough for the investors.

"Although Vietnam has lower transparency than Indonesia, it offers higher growth. Many foreign companies have sprung up there, pushing up the demand for modern properties. They have got many investments," Anton said.

Together with Malaysia and South Korea, Indonesia's real estate market has not shown much improvement over the last two years, since a similar study was conducted. China, India and Vietnam on the contrary have shown the biggest improvement in Asia Pacific.

China's now ranks 49, India 50, Vietnam 77 and the Philippines 47. Singapore and Malaysia, both of which rank high in transparency, are 11th and 23rd in the survey, respectively.(mri)



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