* China state firm to invest $1 bln in Jakarta residential
* Other builders including Mitsubishi, Sime Darby also sign
* They see support from eased mortgage rules; target young
* Foreign residential property investment highest since 2007
By Fransiska Nangoy and Cindy Silviana
JAKARTA, Dec 29 Foreign property developers, led
by state-owned China Communication Constructions Group (CCCG),
made the biggest investment in Jakarta's residential property in
nearly a decade this year as they bet on relaxed mortgage rules
CCCG's $1 billion eight-tower complex is targeting young
middle-income Indonesian couples and is one of the largest ever
in the capital.
Japan's Mitsubishi Corporation, Tokyu Land, Hong
Kong Land, as well as Malaysian Sime Darby,
have also signed deals in Jakarta and surrounding areas,
according to data compiled by construction consultant BCI Asia.
The projects are estimated to be worth at least $2.8
billion, or the highest by foreign developers since at least
2007, and come despite a sluggish Indonesian property market.
"Our target market is young couples, young families. People
who need housing with high accessibility," said Ferry Thahir, a
general manager at PT China Harbour Jakarta Real Estate
Developer, a unit of CCCG. He noted that Jakarta's gridlocked
traffic made proximity to the city centre vital.
Young middle-income Indonesian couples or families are
estimated to already number 55 million, according to data from
developer PT Lippo Karawaci Tbk.
CCCG is involved in residential projects in other Asian
countries such as Myanmar and Malaysia, but in Indonesia it has
up to now focused on infrastructure.
The Chinese state firm is planning another four residential
projects in Jakarta, attracted by rising urbanisation - an
estimated 200,000 people move to Indonesia's capital every year
- and also moves to support the market.
"Efforts by authorities, like the easing of mortgage rules
and the easing of tax rules on property sales, are starting to
move the market," said Thahir.
FOREIGN INVESTMENT BOOMS
Indonesia's Investment Coordinating Board data shows foreign
direct investment in all property segments rose to $1.67 billion
in the Jan-Sept period, up from $1.48 billion a year ago, while
the number of projects backed by foreign investors rose 34
percent to 842 over the period.
Weaker property sales have cut land prices in Jakarta, and
Indonesian companies have teamed up with foreign companies for
funding, said Theresia Rustandi, deputy head of property
association Real Estate Indonesia (REI).
Mitsubishi's joint venture with PT Bumi Serpong Damai Tbk
aims to build 1,000 housing and retail units, while
Sime Darby's partnership with Indonesian developer PT Hanson
International Tbk will invest 11.3 trillion rupiah
($841.71 million) to develop a 500 hectare site.
A global slump in commodity prices has hit Indonesia's
property market. The value of property sales dropped 35 percent
in 2014, 26 percent in 2015 and 49 percent in the first nine
months of this year, according to research firm Indonesia
Property Watch (IPW).
But Bank Indonesia has cut benchmark interest rates by a
total of 150 basis points this year and lowered the minimum down
payment requirement for home buyers, its second cut in two
years. The government has also halved a tax on home sales.
Ali Tranghanda, executive director at IPW, sees property
sales growing by at least 15 percent in 2017 to post the first
annual growth since 2013.
Nonetheless, some domestic developers are more cautious.
"We are seeing recovery, but it will be gradual," said Tulus
Santoso, a director at PT Ciputra Development Tbk, adding that
the market may struggle to absorb newly built homes.
(Editing by Ed Davies and Bill Tarrant)