Apartment business: Time to leave Jakarta

Apartment business: Time to leave Jakarta

Haryanto Adikoesoemo, President Commissioner, PT Metafora Internasional

Many of our colleagues have wondered why we finally decided to
turn to the property business and build a luxury apartment
compound, or a "condotel" (condominium hotel), to be exact, in
Bali.

Regarding this, we would first of all like to state that
although we cannot claim to be an old player in the property
business, we have collected enough experience in the sector. The
Aneka Kimia Raya (AKR) office compound is the first building that
we constructed.

We believe that a property, particularly an apartment
compound, offers a good business opportunity as long as it is put
up at the right location and managed by a professional management

The construction of 10 apartment towers in the Nusa Dua
tourist resort, which will kick off in early June this year, is
an old obsession of ours. By chance we owned close to five
hectares of land in Nusa Dua. We believed that if an apartment
compound, provided with various facilities, was built on this
plot of land, investors would be interested in buying the units.

Indeed, apartment supplies in Indonesia are close to their
saturation point. In my opinion, however, there is still an
opportunity if this business is properly managed and the
properties are built at strategic locations. Location is absolute
key to success in the property business. I am not saying that
Jakarta is oversupplied with apartment units. I simply saw
another opportunity outside of Jakarta, in Bali.

Bali has long been considered one of the most beautiful
tourist islands in the world. This island is not less attractive
than other world-famed tourist destinations like Hawaii and
Mauritius. Thanks to it exotic and beautiful traditional culture,
its natural beauty and its hospitable climate, Bali is virtually
a true paradise on earth.

Bali has always held fond memories for domestic and foreign
tourists. Australians and New Zealanders visit Bali to avoid the
winter in their countries. North Americans, Europeans, Japanese,
Chinese, Koreans and Taiwanese, likewise, come to Bali at then
end of the year, when it is winter in their countries. Domestic
tourists come to Bali during national holidays. In short, Bali
remains a tourist destination for most people wishing to enjoy a
nice holiday.

Based on our experience handling a number of property projects
in Bali, the impact of the Bali bombings in 2002 notwithstanding,
we can say that the occupancy rate at hotels and villas in Bali
has again reached a level of 70 percent to 85 percent. Prices of
property have significantly risen, at least by up to 10 percent a
year. This reality reflects a jump in demand for recreational
property run by good management.

Indeed, every kind of business or investment entails a risk.
In a situation where the market is fine, the yield from an
apartment lease, from the investors' side, should be bigger than
the yield from bank interest, for example.

However, it is not impossible that the price of a property can
also go down. This is always likely when a property is offered at
an overvalued price in the hope of the rapid development of the
area where it is located.

Unfortunately, sometimes this development does not take place
as rapidly as predicted. As a result, the price of the property
goes down or, at least, remains unchanged. Few buyers are
interested in buying while the lease rate is low.

If a property is left vacant for quite a long time and it is
not well taken care of, the condition of the building will worsen
and it is no longer attractive for a prospective buyer. In this
situation, extra expenses must be spent for the maintenance of
the building until it is sold or leased. If a developer promises
a fixed yield, this offer must be interesting and worth
considering.

Now a small tip for investors. It is advisable for an investor
to find out about all the facilities available at the apartment
building and in the surrounding area.

He or she must pay special attention to sports facilities and
find out, for example, how many tennis courts there are, what the
golf course is like and how good are the restaurants and cafes,
swimming pool, parking lots, etc.

A prospective investor must also find out how the apartment
compound is managed. The quality of this management affects the
quality of the services given to tenants and visitors. An
apartment compound can also be managed by a hotel management with
an international network. The way an apartment compound is
managed affects the durability of the equipment, the quality of
sanitation, security and comfort within the apartment compound.

Bali, once again, is, in my opinion, an attractive place for
investment. Various aspects of this island convince me that
property projects in Bali, including the project we are
developing through PT Metafora International, will be well
accepted by the domestic and international markets.