Will Indonesia's new Batam mega city lure Singapore's cashed up buyers?

Former Indonesian president Habibie’s plan to revive Batam’s economy includes the development of eight residential towers, a 100-storey financial centre, and a mega mall.
PHOTO: South China Morning Post

The four glass skyscrapers that have sprouted on the Indonesian island of Batam, a 45-minute ferry ride away from Singapore, are only the start of a billion-dollar plan to attract visitors, investors and property buyers.

Coming up next are a 100-storey financial centre, a mega mall, four more high-rise condominium buildings, a five-star hotel, hospital and university.

This is Meisterstadt Batam - the brainchild of former Indonesian president B.J. Habibie, who wants to transform this corner of the Riau Archipelago and revive the island's economy.

Singaporeans are a prime target. They already go there for golf, shopping, massage and eating out at a fraction of the cost at home.

Batam is just a 45-minute ferry from Singapore. Photo: South China Morning Post

Habibie, who led Indonesia from 1998 to 1999 and once famously said Singapore was no more than a "little red dot", is now wooing Singaporeans to his ambitious project.

He hopes they will visit Batam instead of Johor. Malaysia's southernmost state attracts Singaporeans by the thousands daily, and especially on weekends and public holidays, thanks to a favourable exchange rate.

Habibie wants them to put their money down for a flat in one of the eight glimmering towers of his Wunderbar Residences, which boast panoramic sea views. A three-bedroom, 865 sq ft flat there costs S$154,000 (US$113,078), whereas a new three-room public housing flat in Singapore's Kallang is S$374,000 before grants, according to data from Singapore's Housing Board.

"The units in Batam are significantly cheaper than in Singapore and Batam is not too far away from home," said Lim Ming Hui, 34, a Singaporean prospective buyer who works in the IT industry. "Taking a short ferry ride might also be a good way to relax after a long day at work."

The sprawling 926,000 sq ft Meisterstadt Batam development is backed by Habibie's company, Pollux Habibie International, and Singapore developer Pollux Group. Its name, which translates to "master city" in German, is a nod to the years Habibie spent in Germany as a student and his lasting admiration for the country.

Former Indonesian president Habibie visiting the site of what will become Batam’s first mega mall, located at the Batam Centre. Photo: South China Morning Post

Po Sun Kok, chairman of the Pollux Group, said: "Meisterstadt Batam is only a five-minute drive from Batam Centre Ferry Terminal. A Singaporean living here can easily get to work in just a little over an hour."

The first phase comprises 2,590 flats in the four towers. Pollux Group said Indonesians had bought 90 per cent of the 2,000 sold so far, with Singapore citizens and permanent residents taking up most of the rest, making them the main group of foreign buyers.

For those not looking for property, the new Pollux Mall Batam, a mega shopping complex with stores selling local and international brands, promises to be an attraction.

The 860,000 sq ft lifestyle mall, expected to open in 2020, will include exclusive stores making their debut in Batam, ranging from jewellery to electronics and fashion outlets.

Ilham Akbar Habibie, the former president's son and honorary commissioner of Pollux

Habibie International, expects the mall to be a magnet for the growing middle class in Batam and the region.

Singapore-based Indonesian Dyah Maylanie, in her 30s, has been visiting Batam once a year with friends for leisure, and expects to head there more often after the mall opens. "There is a lot of authentic Indonesian food and snacks found only in Batam and things are generally cheaper there," she said.

Batam has a population of 1.06 million, and is ranked third among Indonesian cities in terms of tourist arrivals behind the capital Jakarta and the resort island of Bali.

Ilham said having an "all-in-one" facility was meant to cater to the growing number of visitors. Singaporeans accounted for one in two of nearly 1.9 million visitors to Batam last year, according to a report by Antara national news agency.

"We need something to upgrade Batam to fulfil the expectations of those who come here," Ilham said.

Batam's strategic location along major shipping routes and good infrastructure helped it flourish in the 1990s, making it one of the fastest-growing cities in Indonesia.

Just a 45-minute ferry ride away from Singapore, Batam attracts Singaporeans by the thousands daily, thanks to a favourable exchange rate.Photo: South China Morning Post

Its liberalisation of investment regulations, coupled with relatively cheap labour and land, also made it an attractive location for manufacturing operations.

In the 2000s, Batam's shipbuilding sector also started to develop.

From 2000 to 2015, Batam saw annual economic growth of about 8 per cent.

This slumped to 2 per cent in 2017, below the 5 per cent national average.

Batam was also part of the Indonesia-Malaysia-Singapore Growth Triangle, otherwise known as the SIJORI Growth Triangle, as part of a partnership in 1989 to draw greater regional and international investors, but it failed to take off as well as envisioned.

Ilham remains optimistic about the neighbours working together in future.

For now, his company has flats to sell and is wooing Singaporeans by simplifying the process for obtaining ownership permits and setting up show units at the Batam ferry terminal.

Property consultants, however, are sceptical Singaporeans will rush to buy in Batam, despite the lower prices.

While many Singaporeans visit Batam for leisure, foreigners have limited rights in terms of owning property there, said Tay Kah Poh, executive director and head of consultancy at property consultant Knight Frank Singapore.

"Indonesia's laws are based on the Dutch legal system and if you are not local, technically you will not be allowed to own property, even though you have the right to use it," he explained.

The rental potential there is also limited, he added.

Christine Li, the head of research for Southeast Asia at real estate services firm Cushman and Wakefield, said Singaporeans were cautious about the risks they faced when investing in property overseas.

"This comes against the backdrop that many overseas investments in emerging countries have gone sour due to opaque regulatory framework, currency loss and geopolitical risks," she said.

The Malaysian state of Johor, next to Singapore, lured buyers with low-priced units at its massive Iskandar development, and Li said some who bought had their fingers burned.

She said Singaporeans tended to look at property in more developed markets, including Australia and Britain.

Ilham remains optimistic that the Meisterstadt Batam will prove a draw, and take Batam to a new stage of its development. "I think it is going to be a new icon of Batam," he said.

This article was first published in South China Morning Post