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.