Investors Express Concerns Over Rising Land Prices In Indonesia’s New Capital

Jakarta Indonesia
A general view shows the capital Jakarta, Indonesia, May 2, 2019. (Photo: REUTERS/Willy Kurniawan/File Photo)

Indonesia will build its new capital in Borneo and while the project has yet to kick off, investors have already started pouring in their cash on lot areas around the site. Prices are spiking quickly as the surrounding lands sell-off and real estate experts are unhappy about it.

According to Bloomberg, the Association of Indonesian Real Estate Companies called on Indonesian President Joko "Jokowi" Widodo to take necessary steps in ensuring that no one will take advantage of the land areas around the expected new capital site.

Borneo is located in East Kalimantan and since it was confirmed that the new capital city will be built there, prices started going up. For real estate experts, fair and reasonable pricing should be practiced even if it is tempting to do otherwise.

Chairman of the property association, Soelaeman Soemawinata noted that the government should be the one taking steps in securing the land areas around the capital city. He said the lots should be sold to private builders.

Widodo previously announced that he hopes to get around 80 percent of the costs of building the new capital through investments from state-owned firms and private companies in the country.

For Soemawinata, "developers and speculators" should be defined appropriately. He explained that while developers will support the government's move of secure the surrounding lot areas, speculators have other purposes.

Soemawinata pointed out that speculators will not really help with any of the work being done for the new capital. Instead, they will just wait for land prices to spike significantly then sell their lots for profits.

Indonesia is expected to break ground for the new capital before 2020 ends. It is further expected that the land areas will be filled up with offices and commercial buildings. PT Bank Mandiri is looking to build its own clubhouse for company executives.

Meanwhile, the Widodo administration is expected to submit its environmental impact study of the project by November. Environmental Affairs and Forestry Minister Siti Nurbaya Bakar confirmed the news on Thursday.

The draft plan states that the new Indonesian capital will be built with green and smart features in mind. Strategic options are being prepared for the president to review before year-end.

News about the environmental impact study's submission came amid continued skepticism from some environmentalists and advocates. They said the country's poor power practices and weak transportation planning helped put the current capital in its polluted and shrinking state.

Planning Minister Bambang Brodjonegoro said the government is expecting to completely relocate the capital from Jakarta to Borneo by 2024.

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