Weakening Rupiah: Will TOD Apartments and Housing Complexes Proliferate?

Jakarta, CNBC Indonesia - The weakening rupiah and rising construction costs are forcing developers to pivot their strategies to prevent property prices from surging too steeply. One trend expected to become more widespread is the development of vertical housing in central business districts or large townships.

“If, for example, the product is in their CBD, they usually build more towards high-rise residential, meaning vertical,” said Milda Abidin, Senior Director of Strategic Consulting at JLL Indonesia, at the Indonesia Stock Exchange (BEI) building on Tuesday (2/5/2016).

Multi-storey housing is seen as an option because construction costs can be spread across more units in a single development area, thus not immediately causing drastic increases in selling prices. In addition to construction efficiency, this strategy is also linked to continuously rising land prices, particularly in urban and central business areas.

“The cost to build is also rising but not significantly. Then the land usage is not large because land prices are expensive,” she said.

TOD Concept in Demand

Meanwhile, for the residential segment targeting middle-class society, developers are reportedly shifting projects to suburban areas to keep prices affordable for consumers.

“For residential to remain affordable for buyers, they build it in one area but a bit more on the outskirts,” said Milda.

Now, developers are increasingly paying attention to spatial planning directions and rail-based transportation connectivity such as MRT, LRT, or KRL, as they are deemed able to reduce mobility costs for the public. This means targeting the transit-oriented development (TOD) concept, considering public mobility access.

“We see now that the RTR map or regional and city spatial planning is already infrastructure-based on rail. Especially rail-based because the cost can quite suppress transportation,” she said.

This transportation cost efficiency can be redirected by the public to pay housing instalments, especially for apartments and condominiums in the supporting areas of big cities.

“This is what developers hope for, with the presence of this transportation mode, transportation costs can be converted to buy condominium instalments,” she said.