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Targeting wealthy Indonesians
Indonesia is a market that offers potential - and
challenges - to Singapore banks.
Yesterday, DBS Group Holdings announced the launch
of its priority banking in Jakarta aimed at wealthy customers with a minimum
of US$50,000 or 500 million rupiah (S$85,000) in assets.
It said its 99 per cent owned PT Bank DBS
Indonesia will start with one 'Treasures' centre at its branch in Thamrin in
Jakarta's central business district that will offer a wide range of services
to foreign and local customers. More Treasures centres will quickly follow.
The plan is to have at least five more centres within three months or so.
One centre is planned for Bandung, an affluent
city situated just one-and-a-half hours' drive from Jakarta.
What a change from less than ten years ago, when
wealthy Indonesians - many of them ethnic Chinese - had to be discreet with
their wealth.
These rich Indonesians came to Singapore regularly
to live it up because under former president Suharto, whose 32-year
authoritarian regime ended in 1998, they could not flaunt their wealth. The
flashiest cars seen then were Mercedes or BMWs. Now, Rolls-Royces, Jaguars
and Ferraris roar downtown. One can also be as ostentatious as one likes,
and the only unwanted attention that such a lifestyle might attract is
scrutiny from the taxman.
While some recent social developments might make
Singaporeans uncomfortable - such as the recent rulings, or fatwas, issued
by Indonesia's highest Islamic authority against liberalism - bankers are
confident of the economic prospects of the country.
Economic growth
In its annual review, the International Monetary
Fund (IMF) forecast that Indonesia's economy would expand 6 per cent this
year.
It also expects the country's gross domestic
product (GDP) to grow 6-7 per cent a year over the medium term, assuming
that the government's economic policies are implemented as planned.
DBS, which till now has focussed on corporate and
wholesale banking in Indonesia, is expanding its activities there. But it is
not alone in this. Rivals United Overseas Bank and OCBC Bank have also moved
to raise their presence there.
UOB yesterday said it was moving to complete the
purchase of Bank Buana, Indonesia's twelfth largest bank. It has executed
sale-and-purchase agreements for a 30 per cent stake in the bank from a
number of shareholders, a move that will lift its stake to 53 per cent
stake. UOB will make a tender offer for the rest of the shares upon
completion of the transactions.
Earlier this year, OCBC Bank raised its stake in
Bank Nisp, the eleventh largest lender, to 71 per cent.
Bank Buana and Bank Nisp have been bankers to
Indonesia's small and medium enterprises.
UOB and OCBC have both said one of their immediate
priorities is to develop the consumer business of their Indonesian
acquisitions.
The growing middle class is a big market for
Indonesian banks, which have been transformed and professionalised by their
new foreign owners.
Previously, many of the banks channelled funds
towards shareholder loans, one of the reasons behind the bank collapses
during the Asian financial crisis.
Niggling issue
Now, with new owners, the banks have to turn a
profit, and consumer banking will be a key source of earnings. DBS estimates
that in Jakarta alone, there are 500,000 mass-affluent residents. In a
country of about 230 million people, with steady growth, banks should have
little problem selling their consumer products.
But one niggling issue comes to mind. One
long-time resident of Jakarta says that banks selling platinum credit cards
and companies selling luxury cars have to disclose the names of their
customers to the authorities. While there are obviously many who pay their
taxes and do not mind the scrutiny, there is a bigger group who might be
deterred.
Bankers in their pursuit of affluent customers
will have to find a way to reassure their customers - otherwise a major
segment of the market will remain out of their reach. -
by Siow Li Sen BUSINESS
TIMES 4 Aug 2005
Indonesia's benchmark stock
index suffered its biggest one-day drop in more than four years yesterday on
concern that Saturday's bomb explosions on the resort island of Bali might
damage the country's economic recovery. - 14
Oct 2002
Singapore players still cautious
about Indonesia
Developers like Keppel Land and
City Developments are monitoring the market
The Indonesian property market may be showing
signs of a revival, but Singapore developers are adopting a wait-and-see
attitude.
Since the Asian financial crisis hit, several
Singapore developers have halted their projects. Now, after five years of
being in the doldrums, the Indonesian market has shown some signs of picking
up.
A BT story last week reported that the pick-up in
activity was due to falling interest rates, the entry of new players, and
the move by the Indonesian Bank Restructuring Agency (Ibra) to offload some
1,700 units worth about 600 billion rupiah (S$119 million) in a nation-wide
auction. Work on some projects are also expected to begin in the next six to
nine months.
But for Singapore developers, caution is the
watchword.
Keppel Land, which has a fairly large presence in
Indonesia, agreed there were 'some early indications of a revival of
interest in real estate sectors that are domestically driven, for example,
retail and local residential housing.'
'These are positive signals of a nascent recovery
in the face of the many challenges Indonesia is still facing,' Keppel Land
said. 'We will continue to monitor the market.'
The group, however, stopped short of saying if it
would speed up development plans.
Keppel Land has put on hold Phase Two of Taman
Pasadenia, a residential project in Jakarta's Pulomas estate. The land has
been leased out to an investor who is operating a temporary 40-bay golf
driving range.
In Yogyakarta, Keppel Land is planning 500
waterfront resort homes adjacent to the Club Med Resort. The development of
the first phase of 64 homes is subject to market conditions, according to
the group's annual report. The opening of the 247-room Hotel Sedona Manado
will also hinge on market conditions.
A locally listed developer who aborted plans to
enter the Indonesian market in 1996 said: 'It's best to be certain that the
recovery can be sustained. Also, you never know when the rules can change
and work against you. Indonesia's a very difficult market to be in; you not
only have to worry about the economy, but there's also the political
environment to think about.'
City Developments, which has a 30 per cent stake
in the Oseania Resort Condominium in Jakarta, said it has been keeping tabs
on the economy as well as the property market.
CityDev entered the Indonesia market towards the
end of 1996, joining a long line of foreign investors after the government
liberalised rules allowing foreigners to buy local property.
However, the Asian financial crisis struck months
later and Indonesia was among the worst hit. Many of the bulldozers and
cranes stopped work and buildings were left half built. The US$80 million
Oseania waterfront condo in Ancol, in north Jakarta, was one of them.
'We are also reviewing the project with our
partners from time to time,' a CityDev spokeswoman said. Oseania is a
CityDev joint venture with Mitsui & Co and PT Bunan Land and units in
parent Hong Leong Holdings. CityDev said it was keeping its options open at
this stage when asked if it or the joint venture has plans to sell out to
another party.
Yet others such as CapitaLand have pulled out of
Indonesia. Earlier this year, CapitaLand announced the disposal of its
stakes in two Indonesia-incorporated units for a total of $49 million as
part of its strategy to focus on key cities outside of Indonesia. One firm
owned a vacant site in Kebayoran, in south Jakarta, while the other owns a
development comprising two uncompleted condominium towers in Permata Hijau,
also in south Jakarta. - by Andrea Tan
Business
Times 03 Oct 2002
SNAPSHOT:
JAKARTA
Jakarta's residential
property market will remain deeply asleep for some time to come, awaiting
political stability and economic recovery. "A lot of investors--the
mom-and-pop kind--would rather buy in Singapore and Australia, where their
children go to study," says Adhitya Wisesa, research manager at
property consultant Colliers Jardine Indonesia.
What it boils down to is this: Indonesians buying
property in Singapore or Australia have confidence in the rule of law in
those places. During the heady days of the construction boom, when credit
was easy, a large number of Indonesians put their money in property which
had not yet been built. But developers then collapsed or absconded in the
wake of the 1998 crisis, and they were left with no redress.
The enthusiasm shown by Indonesians for property
overseas is in stark contrast with zero demand in their own backyard.
"Despite increasing numbers of inquiries from local investors over the
past 12 months, the strong level of interest expressed by them has failed to
translate into bona-fide transactions," Colliers Jardine Indonesia said
in a recent report.
Some 6,300 apartment units, accounting for 24% of
total supply in Jakarta, are still unsold, according to the report. And it
looks as if foreign buyers are no more enthusiastic. Attempts by the
government in 1998 to revitalize the market by allowing certain categories
of foreigners to buy apartments foundered amid the riots and instability two
years later. The expatriate community--which numbered 48,000 before
1997--has shrunk to about 11,000. And government moves to double a
value-added tax--which is applicable to apartments bigger than 150 square
metres--has put another nail in the coffin. Developers have slammed the
proposed 20% tax rate as detrimental to sales of luxury apartments. The PWC
Property Group said in a recent report that "only a few preferred
apartment projects with good locations will be able to maintain sales, and
there may still be tight competition with the secondary-sales market."
Amid the gloom, the residential-leasing market is
offering some signs of hope as personal safety and security concerns prompt
expatriates to lease apartments rather than houses, a trend visible in
growing demand for leased apartments in the last 12 months, according to
Colliers Jardine Indonesia. Leased apartments, it says, registered a 65%
occupancy rate in the second quarter of this year, compared with 64% at the
end of last year. Premium-grade serviced apartments were 95% occupied in the
second quarter of this year, compared with 92% in the fourth quarter of last
year. Rental rates average $17.8 per square metre per month for
premium-grade serviced apartments and $14.7 per square metre for nonserviced,
luxury apartments.
Despite the slight uptick in apartment leasing,
the overall residential market is not going to change much unless the
accession of Megawati Sukarnoputri to the presidency has a considerable
effect on consumer confidence. "We hope market confidence will improve
next year, provided the government can maintain stability and its economic
policies bear fruit," says Wisesa. Only then will Indonesians consider
buying at home. - Far
Eastern Economic Review
PROJECT: Four Seasons
Regency
DEVELOPER: Dewata Wibawa
Located in the heart of Jakarta's central business district, these four
residential towers comprise 472 units, ranging from198 square metres to 871
square metres. Three- and four-bedroom flats are available. They are for
sale at $550,000 to $1.1 million, or for lease at around $3,500 a month for
a minimum of 12 months. The development features a sophisticated security
system, a state-of-the-art fitness centre and a children's playground.
PROJECT: Eksekutif
Menteng Apartment
DEVELOPER: Indofica Housing & Saranapratama Artamandiri
Comprising four residential towers, this prime development is located in the
Menteng area close to the central business district of Jakarta. It offers
240 units ranging from 86 square metres to 539 square metres, with
one-bedroom apartments and penthouse units available. The complex is
equipped with sports and luxury entertainment facilities. Apartments rent
for $15 per square metre per month.
PROJECT: Casablanca
Apartment
DEVELOPER: Suryaraya Prawira
Featuring two towers of 16 storeys and 24 storeys respectively, this
condominium is located on Casablanca Road in the central business district.
Units in sizes ranging from 81 square metres to 347 square metres are
offered for rental, with average rent ranging from 7.7 million rupiah ($855)
to 25 million ($2,780) per month. Sports facilities, including swimming
pools, gymnasium, fitness club, squash court and sauna are built to
international standards.
Far
East Economic Review
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