25 December 2023

Sprawling: An Inherent Trait of New Town Development

We can't expect high density development in our suburbs because sprawling is an inherent trait of Indonesian new town development.

  1. Indonesian suburb new town developments are mainly working on a massive area of land bank.

  2. Their business model usually involves buying the land at a very low price and selling it at an extremely high price to allow a high margin of profit. That price are basically not set by market valuation but instead engineered by the developers.

Those two aspects drives the developer to really run their business based on land, and that's why their main product will be landed houses or landed shophouses. Combined with the investment as the general orientation of the market and the unregulated property ownership limitation, any property product without land ownership will be considered unattractive.

In effect, the landed property product scheme makes only around 50% of the total land area will be usable, and the larger the land bank is, the more sprawling it will be.

For example, one of the largest developers has around 6000 Ha land, which spans for around 10 Km distance. Another one has more than double land bank and spans for 30 Km.

Let alone commuting to the nearby cities or the main city, they are even sprawling very heavily in itself.

To add to the complexity:

All Indonesian developers are strictly property developers. They don't build public transportation, especially not to the nearby cities/main city. The best that they can do is to create internal bus system.

  1. Landed house pattern of develpment is not really working well with public transportation.

  2. With the price of property that the developers had engineered, most of the units that they build will be suitable only to the higher than middle income owners and users, which - currently - are not the main user of public transportation.

And to complicate the matter a bit more:

A large portion of the units developed by the developers are usually acquired by investors for their own property investment. That means that the majority of the thousands of units built by the developers are being built but not used. They are not part of the solution of the housing provision for the people. They are mainly just investment scheme.

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