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Introduction to Real Estate Investments in Indonesia

Join this presentation to learn about real estate investments in Indonesia, with a focus on apartment products. Discover the value determinant factors and gain insights into the market.

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Introduction to Real Estate Investments in Indonesia

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  1. Introduction to real estate investments and value determinant factors for apartment products in Indonesia Bandung, 12 March 2019 Dr. Raden Aswin Rahadi School of Business and Management, InstitutTeknologi Bandung, Indonesia Adapted from Teaching Materials by Prof. Markus Greissler (California State University, Sacramento, USA), Guest Lecture Presentation by Mr. SaldyFitrianda (Northstar Pacific & Partners) & Personal Scientific Publication

  2. About me Brief Introduction

  3. Educational Backgrounds Academic Qualifications • D.S.M in Science Management (Cum Laude), School of Business & Management, InstitutTeknologi Bandung, Bandung, Indonesia, 2015. • M.B.A in Business Administration, Fachhochschule Konstanz - HochschulefürTechnik, Wirtschaft und Gestaltung, Konstanz, Germany, 2009. • M.M in Management, Swiss German University, Serpong, Indonesia, 2009. • S.T in Architecture Engineering, InstitutTeknologi Bandung, Bandung, Indonesia, 2003. Professional Qualifications R.F.A in Financial Planning, International Association of Registered Financial Consultants (IARFC), USA, 2015. International NLP Basic Practitioner, National Federation of Neuro-Linguistic Programming (NFNLP), USA, 2014. Q.W.P in Wealth Planner, IAFP Global Qualified Wealth Planner, Indonesia, 2012.

  4. Professional Experiences Faculty Member, School of Business and Management, InstitutTeknologi Bandung (SBM-ITB), Bandung, Indonesia. 2017-now. Senior Lecturer, School of Maritime, Business and Management, Universiti Malaysia Terengganu, Kuala Terengganu, Malaysia. 2016-2017. Managing Partner, ra+ Consulting, Property, Bandung, Indonesia. 2010 – 2016. Senior Associate, Northstar Pacific, Investment Banking, Jakarta, Indonesia. 2004 – 2010. Junior Business Development Manager, PT. BumiSerpongDamaiTbk., Property Developer, Serpong, Indonesia. 2003 – 2004.

  5. Research Interests

  6. Real Estate Investments Definition & Concept

  7. Definition of Real Estate Real Estate is artificially delineated space references to a fixed point on the surface of the earth with a fourth dimension of time. It is built to house an economic activity that is subject to cultural preferences and restricted by the public infrastructure.

  8. Concepts • Space-Time Product Real estate is a space-time product, that is it generates income over time in exchange for the use of space. Examples: apartments, football tickets, wedding receptions

  9. Characteristics • The Real Estate Market Characteristics: • Highly Stratified, Local Markets • Heterogeneous Product • Private, not Public, Transactions • Unsophisticated Investors • Unorganized Market

  10. Real Estate Investments Investing in Real Estate

  11. Investor Motivations

  12. Direct and Indirect Real Estate Investments TYPES OF REAL ESTATE INVESTMENTS YOUR HOME VACATION HOME COMMERCIAL PROPERTY RAW LAND REAL ESTATE SYNDICATES OR LIMITED PARTNERSHIPS REITS 1ST AND 2ND MORTGAGES PARTICIPATION CERTIFICATES

  13. Real Estate Investments Property Investment and Development

  14. Types of Real Estate Development

  15. Brownfield • In general, it refers to previously used land or areas of industrial or commercial facilities that are to be upgraded

  16. Greenfield • It refers to undeveloped land in a city or rural area either used for agriculture, landscape design, or left to evolve naturally. • It can be unfenced open fields, urban lots or restricted closed properties, kept off limits to the general public by a private or government entity.

  17. Sub-Division • Subdivision is a property investment strategy which divides up a single piece of land into smaller pieces or lots, which can be developed (buildings on them) and sold separately. • In order to succeed in sub-division projects, the development potential must be evaluated carefully and accurately, factoring location, development permissions, cost of development and local market conditions • Partnering with experienced investors and developers will substantially increase the success rate of the sub-division projects as well as the maximum return on investment

  18. Industrial Used for manufacturing and production

  19. Residential Used for living purposes

  20. Commercial • Buildings or land developed to generate a profit, either from capital gain and/or rental income • The businesses that rent in commercial real estate usually lease the space • A developer/investor usually owns the building and collects rent from each business that operates there

  21. Repositioning and Re-Development Repositioning and redevelopment projects can offer many advantages that new developments do not have. Every project is different, can save money on construction cost; faster to develop; have heritage and historical value; unique features and story; community value add; and increase land values of surrounding area

  22. Real Estate Investments Overview of Investment Decision Process

  23. Framework for Real Estate Investment Studies • Strategy: Develop an overall investment philosophy • Analysis: Measuring return • Decisions: Risk and return evaluations • Investment Transaction • Feedback

  24. Investment Analysis vs. Feasibility Analysis • 1. Investment and Investment Analysis • Capital Assets • Equity • Debt • NOI • Lender/Equity Relation • Maximizing Wealth • Return and Risk

  25. Investment Analysis vs. Feasibility Analysis (continued) • 2. Feasibility and Feasibility Analysis • Site in Search of a Use • Use in Search of a Site • Investor Looking for the Best Investment Alternative • 3. Investment Life Cycles • Property Life Cycle • Ownership Life Cycle • Investor Life Cycle

  26. Investment Analysis vs. Feasibility Analysis (continued) • Ownership Life Cycle • Acquisition • Operation • Disposal/Termination • Investor Life Cycle • Young Investor • Middle Aged Investor • Older Investor • Institutional Investor

  27. Real Estate Investments Decision Making Approaches to Real Estate Investment

  28. Investment Decision Process

  29. Analytical Tools…

  30. List of Determinants • Macro Outlooks • Socio Economic Overview • Investment Overview • Demographic • Government Plan • Political Condition • Micro Outlooks • Local condition • Local Characteristic • Location Characteristic • Competitor Review • Local Government Plan

  31. I Ro V Traditional Financial Decision Making Approaches • 1. Investment Value Approach • Invest if: V > C • Reject if: V < C • 2. IRV • Assumes: • Productivity = NOI • NOI is stabilized • Holding period is infinite • Capital is recaptured from income, except land

  32. Modern Capital Budgeting Approaches

  33. Real Estate Investments Sample Forecasting: Residential

  34. Residential Demand

  35. Residential Supplies

  36. Residential Supplies

  37. Market Positioning

  38. Residential Forecasting Sample

  39. Real Estate Investments Current Trends in Apartment Development

  40. CURRENT STUDIES(RAHADI, 2015)

  41. CURRENT STUDIES(RAHADI, 2015)

  42. CURRENT STUDIES(RAHADI, 2016)

  43. CURRENT STUDIES(JLL, 2018)

  44. CURRENT STUDIES(JLL, 2018)

  45. CURRENT STUDIES(JLL, 2018)

  46. CURRENT STUDIES(C&W, 2018)

  47. CURRENT STUDIES(Colliers, 2018)

  48. CURRENT STUDIES(rahadi et al., 2019)

  49. CURRENT STUDIES(rahadi et al., 2019) Mean Analysis Results for All Cities (Authors’ Analysis) Ranking of Mean Analysis for All Cities (Authors’ Analysis)

  50. References • Cushman and Wakefield. 2018. Jakarta Rental Apartment December 2018. • Colliers. 2018. Jakarta Property Market Report Q2 2018. • Fitrianda, S. 2017. Real Estate Investments. Presented in Guest Lecture Session “MM5006: Business Economics”. School of Business and Management, InstitutTeknologi Bandung, Indonesia. • Greissler, M. 1998. Real Estate Investments. Retreived from: https://www.csus.edu/indiv/k/kuhlej/135c12/135CHP12.PPT. Accessed on: 8 March 2019. • Jones Lang LaSalle. 2018. Jakarta Property Market Review Q3 2018. • Rahadi, R. A., Wiryono, S. K., Koesrindartoto, D. P., & Syamwil, I. B. (2015). Comparison of the property practitioners and consumer preferences on housing prices in the Jakarta metropolitan region. International Journal of Housing Markets and Analysis, 8(3), 335-358. • Rahadi, R. A., Wiryono, S. K., Koesrindartoto, D. P., & Syamwil, I. B. (2016). Factors Affecting Housing Products Price in Jakarta Metropolitan Region. International Journal of Property Sciences (E-ISSN: 2229-8568), 6(1). • Rahadi, R.A.; Qastharin, A.R.; Bekti, R.; Aryakusuma, W.; Rahmawaty, A.; Groda, S.P. 2019. Value Determinant Factors for Apartment Products in Indonesia. Working Paper.

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