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Indonesia Property Market in Its Prime: Developer

Roshan Vaswani|Senior Producer, CNBC Asia Pacific
Tuesday, 26 Jun 2012 | 1:18 AM ET

Indonesian property stocks have fallen 18 percent this year from their peaks, but one of the country's biggest property developers, Lippo Karawaci says the real estate sector is in its prime.

Sold sign
Sold sign

The CEO of the company’s shopping malls division, Michael Riady, told CNBC’s “Cash Flow” on Tuesday that "If you look everywhere there are shopping malls, condos, hotels, all sub sectors are performing really well right now. I think the Indonesian real estate sector today is at a prime time."

Lippo Karawaci is part of Indonesian conglomerate the Lippo Group, which has interests in media, telecommunications, health care, retail and real estate.

Citi is also positive on the Indonesian property sector saying its fundamentals look strong. In a report last week the bank said, "Property demand continues to outstrip supply, launches are quickly being absorbed.”

Citi added that the new rules that set a maximum loan-to-value ratio for housing loans at 70 percent to prevent a property bubble from developing will have little impact on the market. “Banks are aggressively providing mortgage loans, and even a lower LTV [loan-to-value ratio] of 70 percent is unlikely to dampen demand."

According to Riady the majority of property buyers are Indonesian and there is still room for foreign investors to come in to the market, "If you look at Indonesia, I would say close to 99 percent are all domestic buyers, so being a very big domestic market we think that Indonesia is still under served."

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