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Key plots ‘vital’ for projects in new capital of Indonesia

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Indonesian President Joko ‘Jokowi’ Widodo (centre), defence minister Prabowo Subianto (right) and public works minister Basuki Hadimuljono inspect the government’s plan to build a road to connect the Balikpapan-Samarinda toll road with the site of the new capital city. INDONESIAN PRESIDENTIAL SECRETARIAT PRESS BUREAU

Key plots ‘vital’ for projects in new capital of Indonesia

Securing key plots for projects related to Indonesia’s new capital in East Kalimantan is crucial to ensure speculative purchases of land do not hamper development, experts say.

Indonesia Property Watch CEO Ali Tranghanda told the Jakarta Post late last month that the government needed to secure strategic lands by buying or passing regulations to prevent speculative land buying and optimise special zoning in the planned city.

“The government must [pursue] a land control strategy to ensure that [land and property prices] are resistant to speculation,” said Ali. He suggested the government and state-owned enterprises set up land banks for the territory of the new capital city and accelerate the distribution of land before prices increase.

Voicing similar concerns, Soelaeman Soemawinata, who heads the new capital city working group at the Indonesian Real Estate Developers Association (REI), said securing strategic lands would curb land speculation in the area.

“So far, I see that the government has carefully prepared [parts of the] land where the new capital city will be located,” Soelaeman said. He added that speculation might occur in the vicinity of the new capital, such as in Balikpapan and Samarinda, but not likely in the area of the new capital city itself.

President Joko “Jokowi” Widodo announced on August 26, 2019, that the site chosen for Indonesia’s future capital was an area of 256,000ha located in two regencies of East Kalimantan, namely North Penajam Paser and Kutai Kartanegara.

According to current projections, the project will cost 466 trillion rupiah ($32.7 billion), only about 19 per cent of which is to come from the state budget.

Soelaeman went on to say that developers were currently waiting for a bill and derivative regulations to be issued into law. Until those were in place, it would be hard to predict land and property prices in the new capital city. Developers also needed clarity on licensing and ownership mechanisms before preparing investment proposals, he added.

In an effort to curb land speculation in the new capital city and protect citizens’ land rights, North Penajam Paser regency issued Regency Regulation No 22/2019 on supervising the sale and purchase of land in the territory of the new capital city.

The regulation aims to protect the local community against approaches from outsiders offering to buy their land at low prices, according to North Penajam Paser Regent Abdul Gafur Mas’ud, Antara news agency reported in December last year.

Abdul projected that land prices in North Penajam Paser would reach more than 500,000 rupiah per sqm, which would be a drastic increase from 50,000 rupiah as of last year, after the new state palace was established.

“Such regulations are necessary to anticipate speculation and prevent land prices from going through the roof,” said Soelaeman.

The public works and housing ministry did not immediately respond to a request for comment on the issue.

Arief Rahardjo, head of research and strategic consulting at real estate services firm Cushman & Wakefield, said that, generally, accessibility affected property development, including by increasing land prices. He also noted that, along with such developments, modest residential areas would grow into large townships.

“These townships are usually owned by private sector [entities]. In that case, the government could not control land prices,” he told the Jakarta Post late last month. Because of this, Ali suggested the government reserve land for lower-to-middle class consumers to optimise urban planning.

Similarly, Jakarta Property Institute (JPI) executive director Wendy Haryanto told the Jakarta Post that “the government needs to have an adequate zoning map to develop the city’s economic value and control [property and land prices] in the market”.



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