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Stock Index
Bahana Securities

18 Dec 2018 | 02:42 WIB
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Currencies
Bahana Securities

18 Dec 2018 | 02:42 WIB
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Possible game changer

The Indonesian property market may see a game changer once the Ministry of Finance (MoF) finishes drafting the MoF Regulation (PMK) on the possible allowance of tax amnesty repatriated funds to be invested in the real sectors such as gold and property.

Note that although the new regulation, if unmonitored, may result in a property bubble, direct investment is likely to boost the current weak demand in the property sector, especially for mid-high-end segments.


However, we note that based on State Land Agency Regulation (KBPN) No. 6 1998, each Indonesian family is only allowed to own a maximum of 5 houses totalling 5,000sqm in “freehold” (Hak Milik) property assets, excluding “right-to-build” (Hak Guna Bangunan) ownerships.


In our view, it is safe to assume that most of the participants in the tax-amnesty program belong to upper-class income segment. That said, we are of the view that the possible repatriated funds would then benefit middle-upper property segments.


Hence, we expect CTRP, APLN and LPKR to be the main beneficiaries on the back of their ample middle-upper targeted pre-sales portfolio this year (exhibit 1).


Leading up to the implementation of LTV relaxation by the Central Bank (BI) in August, we expect positive sentiment to benefit SMRA, PPRO and BSDE most given their large mortgage exposures (exhibit 2).


In fact, to support the property sector, BI appears to be fanning transactions for 2nd & 3rd mortgages, particularly for larger house sizes of more than 70sqm, targeting middle-upper income earners.


The government stated that the amount of overseas funds parked offshore is wide ranging between IDR3,147-11,450tn. Assuming 5% repatriation, the amount of fund inflows would reach IDR157-573tn.


At the lower end of the range, this is equivalent to more than three times the aggregate 2017F pre-sales target of property companies under our coverage.


In July 2016, we note that the government has received IDR146.4tn (+72% m-m) of penalty revenue and IDR7.1tn (+90% m-m) of declared/repatriated assets. This bodes well for the future of the Indonesian property market prospect, in our view.

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