Peaceful election brings fresh hope to landlords

Agustina Wayansari/Hendarsyah Tarmizi, The Jakarta Post/Jakarta

Major apartment complexes are gearing up for face-lifts and more aggressive sales campaigns to anticipate a surge in demand, following the nation's peaceful direct presidential election.

Hotel Borobudur, which manages the Garden Wing apartments, is renovating its apartments to take the advantage of the more favorable market.

Puri Casablanca is also improving its room service, sports facilities and children's playground, while other apartment complexes plan to intensify their sales campaigns.

Poul E. Bitsch, the general manager of Hotel Borobudur, said that he was optimistic that the smooth democratic process would provide a healthier climate to further strengthen the recovery of the economy.

Although, he admits it is too early to estimate the real impact of the election on business, Bitsch said the smooth holding of the first round of the election had already boosted market sentiment.

"There will be definitely a growth in demand, albeit at a slow pace," he said.

On the back of such positive investment, the hotel will continue with the renovation of its apartments, which has been underway since early last year.

"About 80 percent of the apartment complex has been fully renovated and, hopefully, the rest will be completed by the end of this year," Bitsch told The Jakarta Post. .

Like other apartments, Hilton Residences will also improve the quality of its services and intensify its sales campaign to win a larger part of the growing market.

"We will try any effort to ensure that our guests will feel at home in our apartment," Ria Octavianty, the Hilton Residence's sales manager, said.

Similar optimism was expressed by Hans Pola, the general manager of marketing and serviced residences at Puri Casablanca apartments.

Pola believes that no matter who wins the runoff on Sept. 20, the election's impact on business activities will be positive. The main impact of the election, according to him, will be an improvement in the economy and security situation, the most important factors for the apartment business.

Retired general Susilo Bambang Yudhoyono, who by July 16 had collected 44 percent of the vote, and incumbent Megawati Soekarnoputri, with 26 percent of the vote, will most likely compete in the second round. A candidate would need 51 percent of the vote to win the presidential election straight off.

Analysts believe that whoever wins the election this year will be seen as a legitimate leader. Thus, the next president will receive wider support to implement their economic, political and security policies.

"The smooth holding of the first round of the election has resulted in the improvement of investor confidence. This can be seen from the surge in the stock market and the strengthening of the rupiah," said Lily Djafar, a senior analyst with property consultant Procon.

Lily, however, said it would take at least a year from now to assess the real impact of the election on the economy, and particularly on the apartment business.

"The apartment market will record a significant growth, only if there is an increase in foreign investment," she said. "So, the real impact will be seen a year from now."

She said the successful legislative election in April and the smooth process of the first round of the presidential election in early July had indicated an improvement in political stability.

Like other analysts, Lily believes that the smooth democratic process will provide a conducive environment for the elected president to lead the country.

Many people feared earlier that the legislative and presidential elections would incite conflicts among supporters of the political parties and their presidential candidates .

Although some apartments recorded occupancy rates as high as 70 percent in the first semester of this year, the rental apartment market generally remained sluggish due to a sharp drop in the number of foreign investors.

Foreign investment approvals continued to decline. The Investment Coordinating Board (BKPM) said last week that during the first semester of this year, approved foreign investment dropped by almost 35 percent to US$3.05 billion, compared to the same period of last year.

Security uncertainty and the country's corruption-prone legal system remain a major disincentive to foreign investment in Indonesia.

The board's deputy chairman Yus'an, however, said that the successful legislative election, and the smooth holding of the first round of the first round had provided a boost to market sentiment.

He hoped that the appointment of a "more legitimate" president would further improve foreign investor confidence.

Mustafa Salim, a senior executive of Apartemen Menteng Eksekutif supported Yas'un's view. "With the improvement of security conditions, and political stability, Indonesia will become more attractive to foreign investors", he said.

On the back of this optimism, Apartemen Menteng will also renovate its rooms and other facilities.

Mustafa said that the renovation of the apartment building, and the improvement of services and facilities, were a must for the relatively old player Apartment Menteng to enable it to compete with the growing number of new players in the business.

"A number of apartment complexes are under construction. In 2006, they will compete head-to-head with old players, like Apartemen Menteng," he said.

Leasing transactions in the rental apartment market were very active during the January-March period, with total net take-up reaching 243 units, a sharp increase from that of the last quarter of 2003, which experienced a negative take-up of 32 units, according to a quarterly report issued by Procon.

Cumulative demand as of March 2004, stood at 10,196 units, an increase of about 30.5 percent from the pre-crisis figure of 7,812 units.

The consultant said that no additional supply was recorded during the three-month period. The total cumulative supply, therefore, remained at 14,936 units.

In line with increasing market activities, the overall occupancy level increased by 1.62 percent in the three-month period to 68.3 percent, leaving about 4,740 units vacant.

Future supply is expected to come from the launch of 207 new rental apartment units at Twin Plaza Apartment and Four Seasons Tower 4. New supply will also come from the entry of 416 strata- title apartment units into the rental market by the end of this year.