Investors Rushing to Buy Land Around New Capital of Indonesia’s

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September 3, 2019

Indonesia new plan for moving the capital to the island of Borneo, estimated proximately at $33 billion project. This plan has sent real-estate developers scrambling for land in the vicinity of the proposed city. This action already pushing up the prices of the land.  The Association of Indonesian Real Estate Companies, wants President Joko Widodo to regulate those seeking to profiteer from the soaring demand in East Kalimantan. Chairman Soelaeman Soemawinata said the government should secure land and sell it to private builders for a reasonable price.

About 180.000 hectares of land in the area around the new yet-to-be-named capital is controlled by the government. Jokowi, is counting on private and state-owned entities to bear about 80% of the cost of building the capital. Speculators don’t develop anything they just wait until the land prices increases and sell. While on the other hand, developers expect government to secure the land, so they can develop the project.

The area which will be the new capital between North Penajam Paser and Kutai Kartanegara in East Kalimantan become the newest investor attraction. PT. Agung Podomoro Land, a developer of luxury condos in Jakarta, advertised its residential and commercial project in Balikpapan this week as also saying foreigners were eligible to buy. PT PP Properti also said that it was planning to develop approximately 500 hectares in East Kalimantan, while PT Wijaya Karya Persero, a state-owned builder was ready to take the lead in constructing everything from roads to power, gas and water networks.

The construction will begin by the end of 2020 and the phases of the capital relocate starting from 2024, said Planning Minister Bamband Brodjonegoro. This project will be financed by the government and through private-public partnership.

As the second largest lender by assets, PT Bank Mandiri, expected higher loan demand from property and infrastructures developer. Soelaeman also suggest that Jokowi provide a legal basis for the participation of private developers considering the construction may span several regimes.

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