Wednesday, May 29, 2024

BSD to develop a digital hub in BSD City with 2023 Capex of IDR 2.5 trillion

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Real estate developer PT Bumi Serpong Damai Tbk (BSDE) will develop a 25-hectare (ha) office area dedicated for technology-based companies or startups by allocating IDR 2.5 trillion (US$ 164.6 million) Capital expenditure in 2023.

Since its establishment in 1984, the company has developed the BSD City into a modern suburban with public facilities, infrastructures and parks. The housing complex has a vast area of more than 6,000 ha with 40,000 houses occupied by 450,000 population, 25 ha of green office parks, 46 ha of entertainment and malls and 7 universities. BSDE is a subsidiary of PT Paraga Artamida (32.88%) dan PT Ekacentra Usahamaju (25.63%). While the ultimate beneficial owner is the Widjaja Family Master Trust.

BSD acquires more land from internal funding

“The maximum Capex this year is IDR 2.5 trillion, but the average is IDR 1.5 trillion per year,” BSDE Director Hermawan Wijaya said on February 22, 2023, as quoted by bisnis.com.

BSDE will start the construction of an office area for startup and technological companies, which will serve as a knowledge hub or center of knowledge. The company will likely spend between IDR 400-IDR 500 billion for the construction while the source of fund will be from its internal funding.

Wijaya explained that the company would allocate IDR 500 billion for land acquisition using internal source. The plot of land, estimated to reach 40 ha, is for the company’s projects in BSD City, Tourism City and Grand Wisata.

Read also: Sinar Mas Land to build Indonesia’s Silicon Valley in BSD City

BSDE will use internal cash to acquire the land since its policy states that loans can only be made for development and not for land acquisition.

“If you look at our balance sheet profile, we are still cash rich,” Wijaya said.

The company still has loan facilities from two state-owned banks of BNI and Mandiri of IDR 1 trillion and IDR 2.5 trillion, respectively. It can use these loan facilities for any sort of needs except land acquisition.

Risks in property business

There are 3 significant problems in property business in Indonesia:

  • Land acquisition and ownership: A significant challenge in the property business is the complicated process of land acquisition and ownership. There are many regulations and laws related to land ownership, which can be challenging for both domestic and foreign investors. This can result in delays, additional costs and potential legal disputes for developers.
  • Infrastructure and transportation: Developers are facing this challenges due to lack of basic infrastructure such as roads, electricity and water supply. The transportation system is often congested and unreliable as well, which make it difficult for people to access properties in certain areas.
  • Limited access to financing: Many developers struggle to secure financing from banks and other financial institutions due to strict lending criteria and high interest rates. This factor can lead to delays or cancellations of property projects. Additionally, the lack of affordable financing options for potential buyers can also limit demand for properties, particularly among middle- and lower-income households.
Journalist IBP

Journalist

yan

Editor

 

Interview

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