Tutut Handayani

Tutut Handayani
Contributor
Jakarta

Few would have expected that the apartment market would
suddenly accelerate throughout 2002. Marketing of apartments has
to a certain degree revived the property business. In fact, the
apartment market became dormant following the economic crisis in
1998 and the May riots in 1998 as expatriates who stayed in
apartments suddenly returned home.

About four years ago, the occupancy rate of apartments was
less than 20 percent, in fact, much closer to 15 percent. It was
visible to the naked eye how apartment towers were barely
occupied. Ironically, this was the situation found in ready-to-
stay apartments, some of which had been in operation even before
that eventful year of 1998.

Lini Djafar, director of research and consulting services of
PT Procon Indah, said throughout 2002 there was a rising demand
for apartments as the supply of apartment space continued to rise
in all property sub-sectors. This was a clear indication of the
developers' restored confidence in the property market in
general.

New properties throughout 2002 came from the completion of
multilevel office compounds both within and outside the Central
Business District (CBD) in Jakarta. Shopping centers offered as
trade centers with strata title or lease hold of between 20 years
and 25 years in Jakarta and its surrounding areas of Bogor,
Tangerang and Bekasi also added to the new properties available,
along with apartments for rent, apartments offered with strata
title, town houses and expansion of the existing industrial
estates.

Apartments and retail shopping centers are two sectors that
actively revived in 2002. Presales of these projects dominated
the market, given that bank funding for new construction projects
was limited. In the apartment market, the launch of new projects
for the middle-class, upper middle class and upper class market
segments was very active in the second quarter of 2002.
Nevertheless, the vacancy rate of the apartment market in this
quarter remained above 36 percent.

Another challenge came from foreign apartment developers from
Singapore, Malaysia and Australia. They also targeted Indonesian
buyers. Still, some domestic developers were ready to take on the
challenge and adopt an aggressive marketing strategy, advertising
their products intensively.

One of the developers seriously returning to the apartment
market is PT Duta Pertiwi. This company was successful with its
International Trade Center (ITC) complex in Mangga Dua, West
Jakarta and later built Ambassador II apartments, which they
began to market in February 2002. This apartment compound,
located in Jl. Dr. Satrio in Kuningan, South Jakarta, supplied
new apartment space in post-1998-crisis years. Within the space
of one week 225 apartment units were sold out.

The success of Duta Pertiwi was attributable to their
marketing strategy in requiring buyers to pay the strata title
and the lease hold prior to the completion of the apartment
construction. In this way, they could cover the construction
expenses and could get back their capital quickly. That is why
projects like ITC have sprung up in a number of locations in
Jakarta. Duta Pertiwi's management envisions that the concept
behind the success of ITC Mangga Dua, ITC Roxy Mas and Mega
Grosir ITC Cempaka Mas, a well-known center for wholesale sales
of garments, accessories and mobile telephones in Southeast Asia,
will lead to similar hits.

The revival of the apartment business has eventually led to
tighter competition in the property business in general. It is
estimated that up to the end of 2004, the total supply of retail
space in Jakarta, Bogor, Tangerang and Bekasi will reach 2.23
million square meters. If we look closely at some of the trade
center areas ready for operation, we will easily find a lot of
empty space. In fact, these unoccupied and empty-looking units
have been sold out. In this context, Duta Pertiwi should be
praised for their courage to speculate.

In the apartment business many developers have applied the
strata title marketing concept, while the units offered are still
in the drawing stage. Using this marketing mode, much to the
advantage of developers, most units of the apartment compound are
selling like hotcakes. This is confirmed by about 80 percent of
developers that claim there is a run on their products. In fact,
you can hardly see the apartments, in physical form, that is, as
construction is still at a very early stage.

Understandably, in this "pay first, deliver later" selling
mode, during the launch of their projects, developers offer
discounts of between 20 percent and 30 percent off the selling
price per square meter if a buyer pays cash. They also place
grand and dramatic ads in various media, mentioning the names of
famous property brokerage companies and leading property
management service companies. However more cautious buyers
scrutinize the products or conduct a careful physical inspection
and ask around prior to making any deals.

In a housing expo held by the Indonesian Association of Real
Estate developers (REI) at the Jakarta Convention Center (JHCC)
in mid June 2003, the first question that visitors asked was the
identity of the developer.

If they heard a new name, they would do some background checks
on the developer to find out whether it belonged to a major
property company such as the Ciputra Group, Lippo Karawaci, Duta
Pertiwi or Agung Podomoro Group. Clearly, these would-be buyers
were very critical and could not be lured only by sweet promises.

Yudia Shinowitri, a social worker, said one of the yardsticks
to find out whether a developer was bona fide or not was that a
well-established developer would allow would-be buyers to visit
their projects and see with their own eyes the actual progress of
the construction.

Irwan Nurhakim, a young executive working for a foreign oil
company, agreed, saying that developers were actually selling
"trust". "Developers need to have the full confidence of
prospective buyers as they sell only the concept and the
drawings. If they are not committed to what they have promised,
they will never get any real buyers."

What Nurhakim said sounds quite reasonable. If there is a
great demand for apartments, then those with strata title -- the
construction of which was completed long ago -- such as Taman
Anggrek and Taman Rasuna apartments, should have been completely
sold out months back. In reality, Taman Anggrek apartment
compound still has 700 unsold units. The same is true of Taman
Rasuna. Many other apartment compounds like Tropic, Pangeran
Jayakarta and so forth are in the same boat.

Rudolf R. Mangowal, marketing manager of Bellagio Residence,
has warned that there will be fiercer competition between new and
old apartment complexes. Still, buying an apartment unit will
remain more attractive than buying stocks or depositing your
money in a bank. A unit costing US$70,000 will give a profit of
some US$15,000 a year if it is leased out.

Meanwhile, Tony Eddy, director of Century 21 Casablanca, said
during the launch of 87 units of Setiabudi apartments owned by PT
Jakarta Setiabudi International Tbk in March 2003, estimated that
an investor would gain a yield of some 10 percent from the lease
rate of a ready-to-occupy apartment.

Market-wise, he added, most buyers were those "confused" with
how to invest their money. They do not want to invest in the
stock market or deposit their money in the bank because the
returns are minute. That is why they turn to the property
business. These are the type targeted by property agents.

It seems that developers must be careful before concluding
that the apartment market has experienced a revival. There are
many questions about the seeming boom in the apartment market.
Maheda Dwinarendra, associate director of PT Koll Ipac-the Real
Estate Service Company, suggested that developers, despite their
marketing success, have always to be watchful of any possible
changes. They must have deeper insight into the consumers.

In other words, now is not the time to make sweet promises
through attractive brochures and huge banners. They should not
promise short-lived profits to would-be buyers. Critical buyers
will buy what they see as real facts, not merely a promise in
print.