New Indonesian capital ‘Nusantara’ unveils opportunities for property investors

Though Jakarta will remain as the country’s financial and commercial centre, Nusantara will be a haven for property investors

In January 2022, the Indonesian parliament approved the state capital bill into law, which authorised President Joko Widodo to commence the USD34 billion construction project to relocate the capital from the earthquake-prone, rapidly sinking Jakarta on Java Island to the jungles of Borneo Island, reported AP News. 

The new capital, proposed by the President to be named ‘Nusantara’ meaning “archipelago”, will have its own provincial government. Early plans reveal that roughly 1.5 million civil servants will be reassigned to the new city. 

Nikkei Asia added that foreign embassies and international organisations will also be provided with their own land to move their offices within 10 years of the start of relocations, from the previously set and now scrapped deadline of 2024. 

“The construction of the new capital city is not merely a physical move of government offices,” explained the President. “The main goal is to build a smart new city, a new city that is competitive at the global level, to build a new locomotive for the transformation… toward an Indonesia based on innovation and technology, and based on a green economy.” 

Though he noted that Jakarta will remain as the financial and commercial centre of the country, what does Nusantara have in store for real estate investors? 

Since infrastructure continues to be a primary policy objective in the President’s remaining term, both Aldo Massali, the country manager for global workplace solutions, and Jonatan Hills, the editor-in-chief of research in Asia Pacific at CBRE Indonesia, told RETalk Asia that they perceive positive outcomes for real estate investors and developers. 

“The [new capital] will require the construction of new infrastructures, such as roads, railways, offices, and housing. The new centre of government will also require supporting infrastructure for the more than one million government employees expected to move to the new location over the next decade,” agreed both Massali and Hills. 

“This migration in itself will prompt further investors and developers to accelerate planning to capitalise on these opportunities.” 

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Moreover, the move to the new capital may lead to new investment and development opportunities in both the current and new capital, seeing as senior government officials have started discussing the notion of leasing out or selling government-owned properties to developers, which will then compel them to construct facilities and infrastructure in Nusantara. 

Consulting Company Cekindo also named infrastructure, along with trade, energy, and tourism, as one of the sectors that foreign investors must keep an eye on. They said that “companies involved in soft and hard infrastructure, such as urban development, utilities, toll manufacturing, environmental consultancy, and those in the business of creating smart cities” will have an advantage in the capital city. 

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JLL uncovered that several investors have already expressed interest in the new capital. Indonesia’s Coordinating Minister for Maritime and Investment Affairs Luhut Pandjaitan said that investors from Hong Kong and South Korea have pledged billions of dollars, whilst Softbank Group Corp has already presented a classified amount towards construction. 

“The commitment from top names such as Softbank and former UK Prime Minister Tony Blair in the steering committee for the new capital will help build trust to attract more foreign investors to support its development,” says Yunus Karim, the research manager at JLL Indonesia. “It could potentially help the government to tap into wider international circles for greater investment flow.” 

With the investors’ optimistic outlook, the country’s leading developers — particularly PropertyGuru Indonesia Property Award winners Sinar Mas Land, Agung Sedayu Group, PT Metropolitan Kentjana Tbk, Astra Land Indonesia, Triniti Land, PT Intiland Development Tbk, Fairpoint, and PT Adhi Commuter Properti — could benefit from the potential of Nusantara and the possibility of a new source of capital. 

Heard of any outstanding residential, commercial, or industrial projects in Indonesia? Nominate them for the 8th annual PropertyGuru Indonesia Property Awards on or before 19 August 2022. To know more, visit AsiaPropertyAwards.com/Award/Indonesia/. 

Gynen Kyra Toriano, Digital Content Manager at PropertyGuru, wrote this article. For more information, email: [email protected].