Property Sector’s Impact on Indonesia’s GDP

According to reporting from Jakarta Globe, Indonesia’s property, real estate, and building construction sectors contributed 14.63-percent to the country’s gross domestic product (GDP) in 2022, according to a study by the research institute LPEM of the University of Indonesia’s Economic and Business Faculty.

The study showed that the three combined sectors generated about IDR 2,865-trillion (USD 191.9-million) to GDP last year. In 2020, these sectors represented 16.3-percent of the national GDP, totaling about IDR 2,516-trillion. And between 2018 and 2022, coupled with their multiplier effects, they generated an estimated IDR 185-trillion a year in tax revenue for the central government. 

“This means these sectors contribute on average about 9.26-percent to the state budget,” LPEM researcher Uka Wikarya said at a conference in Jakarta on Monday.

Property, real estate, and housing sectors are a boon for the sub-national governments across the archipelago. The locally generated income from the taxes in these industries totaled IDR 464.7-trillion during 2018-2022. This equals around IDR 92.9-trillion a year or about 31.86-percent of the locally generated income for the sub-national governments, according to Uka.

Jakarta Globe report that, in 2022 the three sectors opened up new job opportunities for 13.8-million people, or about 9.61-percent of the national workforce. As of last year, 9.54-percent of the Indonesian population lived below the poverty line and without these sectors, the poverty rate could have skyrocketed to 17.37-percent, the study revealed.

Uka told reporters that the forecast for this year’s GDP contribution would have to depend on the growth of both the economy and the property industry. 

“If the property [sector] grows at a faster rate than the national economy, the industry’s contribution [to the national GDP] would top 14.63-percent. But to do so, we would need to penetrate into a larger market, so the end-users can purchase houses at a more affordable price.” Uka said.

“And this calls for incentives, including [subsidies] to slash production costs to provide more affordable housing.”

Budiarsa Sastrawinata, the head of the integrated property department at the Indonesian Chamber of Commerce and Industry (Kadin), said he was optimistic about the sector’s growth for 2023.

“The housing industry intersects with 183-other sectors. If we zoom in on housing alone, especially for the lower middle class, 100-percent of the products within the industry are locally produced. None of them are imported. So if the [housing] sector moves, so will all other industries in the country,” Budiarsa said.

Source: Jakarta Globe

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