Bumi Serpong Damai Spends Rp 1.5t on Extra BSD City Land Acquisition

Jakarta. Property developer Bumi Serpong Damai has bought about 40 hectares of land so far this year for Rp 1.5 trillion, or $111 million, as part of the company’s expansion plans for its flagship development, BSD City on the southwestern outskirts of Jakarta.

Bumi Serpong is refocusing its effort to develop its existing assets in Greater Jakarta, after weak commodity prices and slowing household spending took their toll on the company’s development plan in commodity-rich Sumatra.

The land acquisition was part of Bumi Serpong’s target to acquire 100 hectare of land this year, Hermawan Wijaya, director and corporate secretary of Bumi Serpong, said on Monday. “The majority of the land that we purchased is for BSD City.”

“Due to current economic conditions, we will focus on existing assets rather than an outward expansion of the city,” Hermawan added. “The majority of our land bank is on Java and focused primarily in Greater Jakarta.”

Weak commodity prices and sluggish public and private investments dragged Indonesia’s economic growth down to 4.67 percent in the second quarter of 2015, and are forcing companies to adjust expansion plans.

Hermawan said that the company would delay land acquisition in Medan, North Sumatra. A launch of residential properties in Samarinda, East Kalimantan, will similarly stretch into the first quarter of 2016, as the company completes the underlying infrastructure.

Bumi Serpong will start selling properties in The Elements, located in the Epicentrum superblock in South Jakarta, in the second half this year, as well as apartments in Tanjung Barat in South Jakarta and in Permata Buana in West Jakarta. Bumi Serpong targets to reap up to Rp 9 trillion from the sales, Hermawan said.

Still, development in Jakarta also has its downsides. Hermawan said that land acquisition could be complicated, undermining the company’s ability to meet its target. Bumi Serpong realized only 70 percent of its targeted land acquisition last year, equivalent to 70 hectares.

BSD City now has 5,000 hectares of land area with 2,000 hectares already developed and sold to customers, Hermawan said.

The company still has the permit to acquire and develop an additional 1,000 hectares of land for the satellite city. Bumi Serpong has estimated it would need more investment — between Rp 5 trillion and Rp 6 trillion — for acquiring the land.

“BSD City development will still run for another 20 years, until 2035,” he said.

Bumi Serpong has set aside capital expenditure of Rp 4 trillion to acquire land, build the infrastructure and develop the properties. The company’s revenues rose by 38 percent to Rp 3.4 trillion in the first half of this year from the same period last year, but its net income fell by 45 percent to Rp 1.4 trillion.