Background:
The Indonesian government is planning to move the Capital City away from Jakarta. The new capital will be outside of Java and most likely be somewhere in Kalimantan. The top contender is city called ‘Palangkaraya’. Feasibility studies taking place in some areas in East and Central Kalimantan is 90 percent complete and the final location will be confirmed sometime this year.
Indonesia’s Planning Minister Bambang Brodjonegoro has stated that the construction of the new capital city would commence in the year 2021, with the budget allocation reaching 466 Trillion Rupiah (or Around $32.5 Billion USD). This relocation is mainly to reduce the burdens of Jakarta as a metropolitan city. Issues such as traffic, pollution, overcrowding, and poverty may just get worse if such a drastic measure is not adopted. Moreover, this relocation can reduce inequality and improve growth in Kalimantan province.
Property Investors such as myself would wonder ‘how this planned relocation would affect the property prices in Jakarta?’. After conducting some research, I believe that this relocation would actually boost Jakarta property prices in the long term. Here are some reasons why:
- Jakarta will still remain, as the Economic Hub of Indonesia.
Mumbai and New York are not capital cities, however they are the most expensive cities in their respective countries because of their importance as an economic hub. This is the same case with Indonesia in the future, as only political or government offices will move.
- As Infrastructure improves, the demand for housing will still be robust.
Besides the new MRT phase and LRT, President Jokowi has announced a US$70 billion toll-road spending plan for the country. As infrastructure progresses, Jakarta properties will become more attractive for both investors as well as end users.
- There will be less burden on Jakarta, making it much more sustainable in the long term.
Currently Jakarta is overcrowded and is the fastest sinking country in the world. Flooding and pollution are serious concerns here. Traffic costs the economy an unprecedented US$6.5 Billion a year. This relocation will certainly reduce the city’s burden substantially by moving a large number of people.
- This relocation will not be easy and may take up to 10 years. Many even wonder if can be done successfully. I believe it is a necessary step in making Jakarta a more comfortable home for us and the future generation. It will also spread economic growth more evenly across the country.
Kavin Ratnani – contributor
He is a young property entrepreneur who had bought and furnished his first distressed property at the age of 22 and currently owns 27 properties ranging from condominiums, houses, shop-houses, mini office buildings mainly in Jakarta and a resort in Puncak.
In high school (GMIS), Kavin was the International Baccalaureate (IB) school topper in the year 2009, scoring 42 out of 45 points. He then graduated from the prestigious Hong Kong University of science and Technology with first class honors and full scholarship in BBA in global business/finance. He also completed his Masters (Msc.) in Economics before getting some work experience as a banker in Hong Kong.
He has recently started a Real Estate Broker in Kemayoran, Central Jakarta. You may contact him at (021)6543738 or Email him at: kavinratnani@gmail.com to get property related advice, list your property and to find the best deals in the market.
