Indonesia Real Estate Industry Outlook to 2028

Indonesia Real Estate Market Overview

• The Indonesia real estate market has been experiencing steady growth, valued at USD 9.0 trillion, driven by urbanization, increasing middle-class incomes, and government-backed infrastructure projects. Key cities such as Jakarta, Surabaya, and Bandung are seeing rapid expansion in both residential and commercial real estate developments, supported by improved public transportation networks and better connectivity.

• The dominant regions in the Indonesian real estate market are Jakarta, Surabaya, and Bali, which have emerged as the prime areas for real estate development. Jakarta leads due to its status as the economic and political hub of the country, attracting both residential and commercial investments. Surabaya, being an important industrial and commercial center, continues to see growing demand for real estate. Bali, known for its tourism industry, has a thriving market for luxury residential properties, making it a hotspot for both domestic and foreign investments.
• The Indonesian governments National Affordable Housing Program continues to be a key driver for the real estate sector. As of 2023, the program delivered thousands of housing units, with a target to build another 1.2 million by 2025. The government also introduced new subsidy schemes, allowing middle-income households to access affordable mortgages, contributing to the growth in residential real estate

Indonesia Real Estate Market Segmentation

• By Property Type: The market in Indonesia is segmented Into Residential, Commercial, And Industrial Properties. The residential segment dominates, driven by the growing demand for affordable housing due to urbanization and the rise in disposable incomes. The commercial segment is expanding rapidly, particularly in office spaces, retail outlets, and mixed-use developments in urban centers. The industrial segment is witnessing growth due to increased demand for warehouses and logistics centers, particularly in regions with growing manufacturing industries.

• By Development Type: The market is segmented by development type into New Constructions, Redevelopment Projects, Public-Private Partnerships, and Affordable Housing Projects. New Constructions dominate the market as developers focus on creating modern residential and commercial properties to meet the growing demand in rapidly urbanizing regions such as Jakarta and Surabaya. Large-scale infrastructure projects have also spurred demand for new commercial spaces.

Indonesia Real Estate Market Competitive Landscape

The Indonesia real estate market is competitive, with both local and international players vying for market share. Companies such as Ciputra Group, Agung Podomoro Land, and Lippo Group dominate the residential and commercial property sectors. Foreign players like Hongkong Land and Mitsubishi Estate are increasingly entering the market through joint ventures and direct investments.

Indonesia Real Estate Market Analysis

Growth Drivers

• Urbanization and Rising Middle-Class Income: By 2024, over 60% of Indonesia's population is expected to reside in urban areas, leading to an increased demand for residential properties, especially in Greater Jakarta, Surabaya, and Bandung. The country's GDP is expected to grow at an average rate of 5% from 2023-2025, with rising incomes and employment driving the demand for housing, office spaces, and retail centers. The middle-class population, which reached over 48 million in 2023, is fueling the real estate sector, according to data from Indonesia's Central Bureau of Statistics.
• Government Infrastructure Projects: The Indonesian governments "National Housing Program" aims to build 1 million affordable housing units annually. For 2024, the infrastructure budget is allocated at USD 30 billion, of which USD 1.5 billion is directed towards public housing projects and urban infrastructure development. This investment enhances real estate opportunities, especially in urban regions that see increased connectivity, like the new toll roads in Sumatra and Java. These projects are crucial in meeting the growing housing demand while stimulating real estate growth
• Foreign Direct Investment: In 2023, Indonesia attracted USD 47 billion in foreign direct investment (FDI), with real estate accounting for USD 595 million. This reflects a 7% share of total FDI directed towards the property sector, primarily driven by the increasing demand for commercial and residential developments in urban areas. FDI growth is supported by the governments investment-friendly policies, such as reducing restrictions on foreign ownership of commercial properties, making it easier for foreign investors to enter the Indonesian real estate market

Market Challenges

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  Complex Land Acquisition Procedures: Land acquisition remains achallenge in Indonesia's real estate sector due to regulatory complications and land ownership disputes. In high-demand areas such as Jakarta and Bali, the process of legally acquiring land is often lengthy and complex. Disputes over ownership and ambiguous land laws frequently result in delays for property developments. The regulatory framework around land acquisition requires streamlining to facilitate smoother and quicker property development processes, allowing developers to avoid long delays and reduce the risk of ownership conflicts.
• Regulatory Delays: Obtaining building permits in Indonesia presents another challenge for real estate developers, as the process can be lengthy for large-scale projects. The approval process for environmental impact assessments and construction permits often faces bureaucratic hurdles, which leads todelays in project timelines. These regulatory delays can increase costs for developers and reduce investor confidence in the market, as projects are often held up for extended periods, impacting the timely completion of real estate developments.

Indonesia Real Estate Market Future Outlook

The Indonesia real estate market is expected to continue its growth trajectory through 2028, driven by government infrastructure projects, foreign investments, and rising urbanization. The market is likely to see increased demand for residential and commercial properties, with industrial real estate also playing arole as Indonesia develops its manufacturing sector. The introduction of new public-private partnerships will provide more opportunities for developers to enter the market.

Future Market Opportunities

• Rise in Mixed-Use Developments: Mixed-use developments that combine residential, commercial, and retail spaces are becoming increasingly popular in Indonesia. In 2023, a number of major mixed-use projects were launched across Jakarta and Surabaya, integrating office spaces, residential units, and shopping centers. These developments appeal to investors and homebuyers looking for convenience and efficient use of space, particularly in densely populated urban areas.
• Growth of Green Building Projects: Sustainability in real estate is gaining momentum, with 200 green building projects under development in Indonesia as of 2023. The governments push for eco-friendly buildings through tax incentives for green-certified buildings has encouraged developers to adopt sustainable practices. Green buildings, which include features like energy-efficient systems and water conservation technologies, are becoming more attractive to investors, particularly in commercial real estate.