New Indonesia capital: Land prices set to soar but not all locals thrilled

New Indonesia capital: Land prices set to soar but not all locals thrilled

Indonesia's new capital
Locals are betting on sub-districts straddling the border of Penajam Paser Utara and Kutai Kartanegara to be the new administrative capital. (Photo: Kiki Siregar)

SEPAKU, East Kalimantan: Since Indonesian President Joko Widodo announced the relocation of the country’s capital from Jakarta to East Kalimantan in late August, Mr Sikbukdin has received at least five calls from strangers asking whether he is interested to sell his land.

“I told them no, I am not selling my land. The land is for my children,” the 56-year-old head of the Paser Balik tribe said.

The locals said land value in Penajam Paser Utara and Kutai Kertanegara districts – the two districts set to house the new capital – has surged immediately following Mr Widodo’s announcement.

Business-minded agents wasted no time to spring into action, actively approaching the locals to broach the possibility of them putting up their land for sale.

“Agents from Berau, Tarakan, Tenggarong (in Kalimantan), and even Surabaya and Jakarta have contacted me. They are really aggressive,” Mr Sikbukdin, who goes by one name, told CNA.

Sepaku, East Kalimantan
A scene at Sepaku, Penajam Paser Utara. (Photo: Kiki Siregar)

The Indonesian government is determined to relocate the nation’s capital because Jakarta, which is heavily polluted, is one of the fastest sinking cities in the world.

Jakarta is currently home to more than 10 million people, with another 30 million living in surrounding satellite cities, resulting in severe traffic congestion that cost S$7 billion in losses a year.

By comparison, East Kalimantan – which is largely free from natural disasters, unlike Jakarta and most parts of Indonesia – only has a population of 3.5 million people.

The government hopes the relocation could take pressure off Jakarta. It also believes that with the relocation, the country’s development will spread out as it is currently Java-centric.

Should the parliament give the greenlight to Mr Widodo’s proposal, the government will begin constructing the new capital next year on an initial plot of 40,000ha land and transfer its administration here by 2024.

Some 1.5 million civil servants will move here as well.

READ: Environmental impact study of new Indonesian capital to be ready by November, says minister

READ: How about Jokograd? Indonesians suggest names for new capital

The relocation plan has excited some local residents, not for the future it holds for the province but the potential it brings to land value.

The relocation also spells good news for property developers, for the abundance of opportunities it offers from building a new capital from scratch in a province still covered in lush rainforests.

However, others were sceptical about the central government's ambitious initiative.

LAND PRICES SOAR

The government has said that it owns the 180,000ha land earmarked for the new capital, which is strategically located in the middle of the country. The area is located near Balikpapan – known as the oil city – and the provincial capital of Samarinda.

While the exact site is anyone’s guess for now, people are betting on sub-districts straddling the border of Penajam Paser Utara and Kutai Kartanegara to be the new administrative capital.

One such places is Samboja, where Mr Apriansyah was demarcating the land during a recent CNA visit.

Land in East Kalimantan
Mr Apriansyah is marking the boundary of his relatives' land in Samboja. (Photo: Kiki Siregar)

He said he has been tasked with checking the line markings on the piece of land belonging to his relatives, who live in Balikpapan, about 50km from Samboja.

“The line markings have long disappeared. They haven’t inspected their land for years,” he said.

Mr Apriansyah, who goes by one name, said despite the president’s proposal, his relatives have no intention to sell the land. But they thought it is best to mark the land properly to declare ownership, he added.

A few “properties for sale” signs were spotted along the road connecting Penajam Paser Utara and Kutai Kartanegara district.  

A man, who put up the sign but did not want to be named, told CNA he is selling his 1ha for 1.2 billion rupiah (US$85,210). 

“Everybody is increasing their land price. It used to be 125 million rupiah for one hectare,” he said, but adding that he did not have official documents to support his ownership.

Indonesia's new capital land prices
"Land for sale" signs are seen at Penajam Paser Utara. (Photo: Kiki Siregar)
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Mr Eko, who runs a restaurant in Penajam Paser Utara, said there has been an enthusiastic discussion on land prices.

“Every day, my customers talk about land prices. People coming from Penajam, Jakarta, Samarinda. All they talk about is land,” he said.

“They’re looking for land. They’re middlemen … land mafias,” he added, using a term used by the locals to refer to those who jump at the opportunity to hoard land.

He concurred that land price has increased drastically ever since the president announced the capital would move to East Kalimantan.

“Before this, a piece of 4ha land will be sold at around 350 million rupiah, but now it’s priced at four billion rupiah,” he claimed.

READ: New Indonesian capital offers opportunities for development, but environmental pitfalls abound

PROPERTY DEVELOPERS WELCOME THE MOVE

The relocation plan comes as a good news for property developers, and it is especially so for Agung Podomoro Land, a consortium of developers which has built properties across Indonesia.

The company had in 2013 developed Borneo Bay City, a superblock consisting of malls, offices, hotel and apartments in Balikpapan, which borders Kutai Kartanegara to the north and Penajam Paser Utara to the west.

Borneo Bay City
Property developer Agung Podomoro Land's Borneo Bay City superblock in Balikpapan. (Photo: Kiki Siregar)

Economic growth in Balikpapan, known as the oil city, has slowed since oil and commodity prices plummeted a few years ago, with a number of companies leaving the city and relocating elsewhere.

A day after Mr Widodo announced the relocation, Agung Podomoro Land put up a huge advertisement of its Balikpapan project on a national newspaper.

"This is a blessing for us. The plan to relocate the capital to the two districts, which are relatively close to the Borneo Bay City, has brought an increased interest to our property here," said Mr Agung Wirajaya, director of Agung Podomoro Land.

READ: Trading places: Countries that moved their capitals

Will the vast development potentials and the soaring land prices force the existing citizens to move to the outskirts, as in the case of Jakarta?

East Kalimantan governor Isran Noor said no. “The government has given thought to this,” he said, but declined to divulge more.  

LOCALS SCEPTICAL OF AMBITIOUS INITIATIVE

Indonesia's new capital business
Small business owners are hoping that their business will improve with the relocation of Indonesia's capital to East Kalimantan. (Photo: Kiki Siregar)

However, not everyone is thrilled.

Mr Bambang Sutrisno, 46, is against the idea but said there is nothing he can do.

“Actually, if you ask me, I object to the idea of the capital moving here because I like it like this.

“It’s calm, and our forest has already been destroyed. It only looks still intact but if you go further, you will see the forest is gone,” he said, pointing out the environmental consequences the relocation may bring.

READ: Indigenous people under threat from Indonesia's plan to move capital

There is also the question of whether the government’s relocation plan will come into fruition by the targeted deadline.

The residents in East Kalimantan pointed out that construction of a 99km highway connecting Balikpapan and Samarinda began in 2011 and after almost a decade, it is finally slated to be opened before end of this year.

Balikpapan - Samarinda highway
The highway connecting Balikpapan and Samarinda is slated to be opened before end of this year, almost a decade since construction began. (Photo: Kiki Siregar)

“People are worried whether the relocation will actually be realised. Some are sceptical.

“The process of moving a capital is not easy,” Mr Eko said.

Mr Isran the governor said the government will see to the completion of the relocation. 

“It has to be successful. If the central government says it has to be done by 2024, then it has to."

Source: CNA/ks

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