Indonesian developers want government to curb land speculation around country’s new capital

Indonesia’s plan to build a US$33 billion new capital from scratch on the island of Borneo has sent real-estate developers scrambling for land in the vicinity of the proposed city. And the industry’s representative body says that is already pushing up prices.

The Association of Indonesian Real Estate Companies, which has more than 5,000 member companies, wants President Joko Widodo to take steps to rein in those seeking to profit from the soaring demand in East Kalimantan. Chairman Soelaeman Soemawinata said the government should secure land and sell it to private builders for a reasonable price.

The government controls about 180,000 hectares of land in the area around the new yet-to-be-named capital – about triple the size of Jakarta. Jokowi, as Widodo is known, is counting on private and state-owned entities to bear about 80 per cent of the cost of building the capital.

“I’ve heard that land prices are rising already,” Soemawinata said. “We must set developers and speculators apart. Speculators do not develop anything as they just wait until land prices increase, and then sell. Developers expect the government to secure the land, which can be developed by them.”

The site of the capital, an area somewhere between North Penajam Paser and Kutai Kartanegara in East Kalimantan, mostly consists of protected and commercial forestry under government control, limiting the ability of private investors to snare plots. But that has not stopped builders and construction companies from making plans.

PT Agung Podomoro Land, a developer of luxury condos in Jakarta, advertised its residential and commercial project in Balikpapan this week as a 20-minute drive to the new capital city, saying foreigners were eligible to buy.