Reform needed to give Jakarta property a kick
EXPERTS have urged the Jakarta administration to reform its building permit (IMB) acquirement procedures to weather the economic impacts of Covid-19.
Jakarta Property Institute ( JPI), a non-profit group that mediates dialogue between the government and real estate players, have urged the government to expedite IMB acquirement to attract investment and provide job opportunities amid the current economic woes.
Currently, it takes three to four years to acquire an IMB, and then an additional 18 to 36 months to finish the building construction. In total, it takes six years for a building to be constructed, the JPI has noted.
JPI executive director Wendy Haryanto said on July 9: “During times where the number of layoffs has reached 6.8 million nationally, we need a sector that can provide job opportunities quickly and massively.”
High-rise commercial and residential property construction has provided 450,000 job opportunities between 2018 and this year in Jakarta, JPI data shows. Meanwhile, the property and construction sector have contributed to 17.6 per cent of the Indonesian capital’s regional gross domestic product (GDP).
Wendy stated that the influx of investment and projects from the sector could contribute greatly to the city’s employment rate and overall economy.
The ongoing health crisis has worsened the unemployment rate in the country. The government has estimated that some 5.5 million people may lose their jobs this year, pushing Indonesia’s unemployment rate to between 8.1 and 9.2 per cent, up from 5.28 per cent last year.
Wendy said: “There is still a potential for investment even though it’s leaning toward the residential sector.”
A recent survey held by online property marketplace 99.co and rumah123. com found that 76 per cent of the surveyed respondents were still looking for a residential property this year amid the economic downturn.
Based on the marketplace survey, a quarter of the respondents, most of whom were millennials living in Greater Jakarta, were looking for houses priced between 250 and 500 million rupiah ($17,500 and $35,000) or one and two billion rupiah.
However, while there was still potential for demand, Wendy said the painstaking process for developers to obtain an IMB and file all required licences had caused prices to go up while simultaneously dissuading investors.
The World Bank’s 2020 Ease of Doing Business (EODB) index estimated that it took 191 days to complete construction permit requirements for a standard warehouse in Jakarta, above East Asia and Pacific countries’ average of 132 days.
The cost of a permit in the capital has also proven to be expensive, at around 8.5 per cent of property value, nearly double the average 4.5 per cent of property value in East Asia and Pacific countries, according to the EODB.
Ernst and Young senior adviser Bernardus Djonoputro said that besides cumbersome regulation, the construction and property sector are also facing high liquidity risk and immense pressure for shareholder returns due to the impact of Covid-19.
“The unprecedented downturn and limited access to capital is forcing us to work hard and innovate in all aspects of our sector,” he said.
The pandemic has brought woes to the country’s construction sector, as inconsistent site closures and supply chain disruption caused by the health crisis are adding to project costs.
Bandung Institute of Technology
School of Business and Management lecturer Aries Firman said developers must adopt data analytics and utilise automation during their property’s construction to increase efficiency during times when liquidity was scarce.
To avoid regulatory hurdles, Aries also urged developers to make comprehensive plans prior to the physical construction phase.
“There are many developers that plan as they go. When they are faced with compliance issues, they have to take a step back because they didn’t anticipate them to begin with,” he said.
Furthermore, he added that developers could use building plans from a design library rather than start from scratch and consolidate their value chain to improve efficiency and reduce cost.