Through the revision of an existing regulation the Indonesian government aims to support growth in the nation's property sector. The revision involves a tax incentive that allows Indonesia's first-time home buyers to obtain a subsidized lending rate (mortgage). Those first-time home buyers who have a maximum monthly income of IDR 7 million (approx. USD $504) are eligible to enjoy this incentive that falls under the Housing Loan Liquidity Facility (Fasilitas Likuiditas Pembiayaan Perumahan, abbreviated FLPP).

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Indonesia's Cabinet Secretary announced on Tuesday (12/01) that Indonesian President Joko Widodo signed a government regulation on 22 December 2015 (Government Regulation No. 103/2015 on House Ownership of Foreigners Residing in Indonesia) that allows foreigners to own landed houses in Indonesia for a period up to 80 years. This regulation is designed by the Indonesian government in order to provide more legal certainty to foreigners regarding property ownership.

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In its latest Indonesia Property Watch report, Fitch Ratings states that housing demand in Indonesia remained weak in the third quarter of 2015, leading to property developers' decision to postpone a number of new projects. Low commodity prices and high inflation (up to Q3-2015) led to sluggish demand and tepid economic growth in Southeast Asia's largest economy. Fitch Ratings said residential property price growth in Indonesia continued to slow for the eight consecutive quarter and believes prices are to remain muted in the coming year.

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The launch of the clusters Amanda and Btari - consisting of 400 residential housing units - in the Summarecon Bandung project was well received by the market last week. Within five hours all units were sold. The Summarecon Bandung project is an ambitious integrated city which includes residential areas, commercial areas and mixed-use areas in the Southeastern part of Bandung (West Java). The company behind this project is publicly-listed Summarecon Agung, an Indonesian real estate construction and development company.

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Global credit agency Fitch Ratings stated in its latest Indonesia Property Watch report that demand in Indonesia's property sector will not improve in the short-term. Whereas the Indonesian government implemented policies to cool the property market in 2013 (as authorities were concerned about the emergence of a bubble), it has recently shifted its stance and implemented measures to boost the market amid the country's economic slowdown. However, Fitch Ratings does not expect a quick rebound.

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International credit rating agency Moody’s Investors Service stated that the healthy liquidity levels of Indonesian property developers are expected to be sufficient to offset the negative impact of the heavily depreciated rupiah. A weak rupiah is troublesome - and negative for the credit rating - as about two-thirds of property developers’ debt is US dollar-denominated, while their revenue is rupiah-denominated. Secondly, Moody's is positive about the government recent decision to offer tax holidays.

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AkzoNobel, the Dutch multinational that is primarily engaged in the fields of decorative paints, performance coatings and specialty chemicals, stated that it has shifted its focus from China to Southeast Asia, particularly Indonesia and Vietnam. Ton Buchner, Chief Executive Officer of AkzoNobel, said growth in China has lost its decade-long momentum and thus AkzoNobel will reduce investment realization in China and instead focus on new growth markets in Southeast Asia.

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Several days ago Indonesian Finance Minister Bambang Brodjonegoro announced that the government may soon allow foreigners to own luxurious apartments in the bigger cities of Indonesia. His ministry is currently focused on revising Government Regulation No. 41/1996 on Housing for Foreigners Residing in Indonesia which still forbids foreigners (expats) owning any type of property in Indonesia. Indonesian property developers have warmly welcomed the new plan of the government as it brings more opportunities to the property sector.

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Indonesian Finance Minister Bambang Brodjonegoro is completing a study related to the possibility of allowing foreign ownership of property in Indonesia. In a bid to generate more state revenue through taxation, the Indonesian government may allow foreigners (expats) to own luxurious (residential) apartments in the bigger cities of Indonesia. These apartments should be worth at least IDR 5 billion (approx. USD $375,940) according to current proposals. Brodjonegoro emphasized that expats will not be allowed to own landed houses.

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Industrial estate developer Puradelta Lestari, unit of Singapore-listed Sinarmas Land Ltd, was listed on the Indonesia Stock Exchange (IDX) on Friday (29/05) thus becoming the fifth firm to go public on the IDX in 2015. Through the initial public offering (IPO) Puradelta Lestari raised IDR 1 trillion (USD $76 million) by offering 4.8 billion shares to the public, equivalent to ten percent of the company’s enlarged capital, for a price of IDR 210 per share. On the first trading day, shares of the company rose 4.29 percent.

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Throughout the month of May, the level of volatility of Indonesia's main stock index (IHSG) has been remarkable and interesting. At the start of the month we were shocked by Standard & Poor's downgrade of Indonesia's credit rating outlook as well as Moody's warning to take similar measures as Indonesia had been slow to deal with its subsidized fuel policy. These issues were able to drag the index down. Moreover, the threat of higher inflation triggers concerns that the index would show its traditional fall in the month of May.

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Cement consumption in Indonesia increased 8.6 percent to 18.11 million tons in the first four months of 2013. Demand was particularly supported by property and housing projects in the bigger cities of Indonesia. Another pillar of support was found in the development of various infrastructure projects (including those within the framework of the government's ambitious MP3EI plan). The Indonesian Cement Association expects this year's cement consumption in Indonesia to rise to 61 million tons in total.

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One of the sectors that showed exceptional growth in 2012 was Indonesia's property market. On average, net profit of companies engaged in Indonesia's property sector grew 68 percent during the full year. Of the 45 property companies that are listed on the Indonesia Stock Exchange (IDX), 26 posted net profit growth that exceeded 50 percent. But the success story did not end there. In the first quarter of 2013, the property sectoral index of the IDX continued its fast pace by rising over 41 percent.

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In its most recent report, the Asian Development Bank (ADB) forecasts Indonesia to continue its robust economic growth. Last year, the economy of Indonesia expanded 6.23 percent, and according to the ADB this figure will rise to 6.4 percent in 2013 and 6.6 percent in 2014. However, since the start of April there have been some issues that are causing Indonesia's stock indices to go down. Although believed to be only temporary, it is worth taking a closer look.

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