Real Estate Investment Funds in Indonesia - Credit Suisse · Real Estate Investment Funds in Indonesia Ir. Nurhaida MBA ... SPC included as 1 entity with Collective Investment Contract

Real Estate Investment Funds in Indonesia

Ir. Nurhaida MBA Chief Executive of Capital Market Supervision Credit Suisse Asian Investment Conference Hong Kong, 8 April 2016

Content

1 Indonesian Policies in Encouraging National Economic Growth

2 Real Estate Investment Fund in Indonesia

2

Indonesian Policies in Encouraging National Economic Growth

3

4

2009 2010 2011 2012 2013 2014 2015 2016 (E)

Economic Growth (%) 4.6 6.4 6.2 6.0 5.6 5.0 4.8 5.3

Indonesia: A land of opportunities

Source: Bank Indonesia, Trading Economics

Sustainable Growth Drivers 5

1437

5,454

4,850

0

1000

2000

3000

4000

5000

6000

1/5/2009 7/5/2009 1/5/2010 7/5/2010 1/5/2011 7/5/2011 1/5/2012 7/5/2012 1/5/2013 7/5/2013 1/5/2014 7/5/2014 1/5/2015 7/5/2015 1/5/2016

JCI Agriculture Consumer Property Trading Infrastructure

Broad market index (JCI) and sectoral growth trends 2009 – Q1 2016

The Jakarta Composite Index grew approximately 19% annually since 2009, with support from a strong Consumer Goods (31% annually), Trading (27% annually), and Property (24% annually) sectors, showing increase in domestic demand and economic activity

6 Economic Policy Package

1st Policy Package Sept 9 , 2015

Boost industrial competitiveness through deregulation, law enforcement and increased business certainty; accelerate the implementation of national strategic projects; Increase investment in the property sector.

2nd Policy Package Sept 29 , 2015

Speed up investment licensing for investment in industrial estate; Lower taxes for strategic sectors and incentives for bonded logistics; More details on tax allowances; Lower time deposit taxes for exporters.

3rd Policy Package Oct 7 , 2015

Electricity and Gas Price Reduction; Expansion of the Business Credit for People (Kredit Usaha Rakyat or KUR); and Simplification of Land Licenses for Investment Activities

4th Policy Package Oct 15 , 2015

Fixed formula to determine increases in labor wages; Follow up the smallholder business credit program; Credit for medium and small enterprises for exports in a bid to prevent lay offs.

5th Policy Package Oct 22, 2015

Tax incentives for asset revaluation; Scrap double taxation on real estate investment trusts; Deregulation in islamic banking

6th Policy Package Nov 5, 2015

Boosting the economy in the suburban areas through a development of Special Economic Zones; Sustained and equitable water supply for people; Simplification of licensing at the Food and Drug Monitoring Agency.

7th Policy Package Des 4, 2015

Waive income tax for workers in the nation’s labor-intensive industries; Acceleration and easiness in the land certificate issuance.

8th Policy Package Dec 21, 2015

One map policy to harmonize the utilization of land; Incentives for the development of oil refineries by the private sector; Scrap income tax for 21 categories of airplane spare parts.

9th Policy Package Jan 27, 2016

Boosting electrical infrastructure; Stabilize meat supply; Deregulate logistics from village to global market.

10th Policy Package Feb 11, 2015 Boosting investment and protecting small and medium enterprises as well as cooperatives.

11th Policy Package Mar 29, 2016

Further tax relaxation for real estate investment trusts; Increased port processing efficiency measures; Pharmaceutical and medical equipment development; “People’s credit” for export activities.

Real Estate Investment Fund in Indonesia

7

Real Estate Potential in Indonesia 8

Rapid urbanisation Growing middle–class Strong savings and income growth Low mortgage penetration Property as investment Improving regulatory environment Banking innovation Property prices cheapest in the region Highest yields in the region

ASIA PACIFIC PROPERTY

2,692

2,873

3,156

3,638

15,251

22,814

JAKARTA

KUALA …

MANILA

BANGKOK

SINGAPORE

HONGKONG

PROPERTY PRICE (USD/SQM)

2.82%

2.83%

3.50%

5.05%

7.51%

8.90%

HONGKONG

SINGAPORE

KUALA LUMPUR

BANGKOK

MANILA

JAKARTA

RENTAL YIELD

Source: Global Property Guide, April 2015

Timeline of REIF developmental efforts 9

Indonesia introduced REIF product by launching 4 (four) regulations which regulates: 1. REIF Public Offering 2. Guidelines of REIF Prospectus 3. Guidelines for Investment

Managers and Custodian Bank in managing REIF

4. Guidelines of REIF Collective Investment Contract

Ciptadana Properti Ritel Indonesia issued in 2012 and managed by Ciptadana Asset Management. Single portfolio asset: Grand Mall Solo, Central Java- Indonesia. Total asset size Rp 400 billion (approx 40 million USD).

2007 2012 2015 2016

Indonesia Government issued several policies to enhance REIF: - 5th Economic Policy

Package – Oct 22, 2015

- Minister of Finance Regulation number 200 – Dec 2015

OJK REIF developmental efforts: - Drafting new regulation

regarding REIF Syariah - Collaborate with

government to solving remaining unnecessary cost in issuance REIF (taxation issues)

- Increase stakeholder REIF understanding

New Policies 1st REIF Enhancing Strengthening

Syaria REIFs

A. Ministry of Finance launched new regulations which addressed REIF tax issues, such as: 1. SPC included as 1 entity with Collective Investment

Contract to avoid double taxation imposed 2. Shorter period of Value Added Tax restitution

(within 1 month) B. Coordinated with local government and Ministry of

Home Affairs in relating to give stamp duty incentives for property owner.

C. Drafting revision of Government Regulation regarding the reduction of final income tax

REIF investor and market participant awareness and education efforts

OJK Rule revisions: increasing Loan to Value ratio from 20% to 45%.

REIF income tax and stamp duty cuts.

REIFs Transaction Scheme 10

cash cash cash

cash cash cash

Unit Holder REIF Special Purpose

Company

Asset Property Owner

Unit Holder REIF Special

Purpose Company

Lessee/Tenant

Asset Transfer to REIF

REIF Income Payout

I. Tax to SPC I. VAT 10% (1 month

restitution) II. Stamp Duty 5%

II. Tax to Property Owner Income Tax 25%

Final Income Tax 10% on Rent Payments

Payouts to REIF are tax exempt

Investment Manager

Custodian Bank

REIF

Investment Manager

Custodian Bank

REIF Investments 11

REIF eligible assets: • Indonesian real estate • Indonesian real estate-related assets • Cash and cash equivalents REIF portfolio limits • No less than 50% of REIF NAV in real estate; • No less than 80% of REIF NAV in real estate and real estate-related assets,

with minimum percentange of real estate assets as specified above; • No more than 20% of REIF NAV in cash and cash equivalents When purchasing new assets, REIF can borrow up to 45% of the asset value to finance the purchase

REIF Investor Protection Mechanisms 12

12

No Excessive RE Asset Trading • Minimum holding period of RE Assets

of 2 years • Minimum resale price 90% of appraised

value

Bankruptcy Remote Assets of stored separately and administered by an independent Custodian Bank

No Issuance of Debt Securities • REIF cannot be securitized/issue debt

securities of itself • May only use direct loans up to 45% of

RE Asset purchase value

REIF Annual Report Annual Report must be made available to investors and regulator

General Meeting of Unitholders Should the REIF enter into transactions with afiliated parties, parties involved in the establishment and/or management of REIF, REIF must obtain prior consent from investors

End of Presentation

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