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.