JAKARTA: One of the biggest winners from an Indonesian tax amnesty may turn out to be the shares of real-estate developers, as funds get channeled into investments in the nation's houses and apartments.
Bank Indonesia (BI) estimates about 560 trillion rupiah (US$42bil) of undeclared income will be repatriated as a result of the reprieve. In a country where less than 0.2% of people own stocks, a chunk of this is likely to eventually be spent on real estate, according to PT Manulife Aset Manajemen Indonesia.
The amnesty, together with a relaxation of mortgage rules and falling lending rates, may feed a resurgence in property stocks.
“Regulations are being sorted out, interest rates are easing and liquidity may increase once the tax amnesty happens,” said Alvin Pattisahusiwa, the Jakarta-based chief investment officer at Manulife, whose Indonesian unit oversees around US$3.3bil. “One by one, the keys are being turned.”
PT Summarecon Agung has led a rally in real-estate shares over the past four weeks amid signs the tax reprieve, first proposed in early 2015, is getting closer.
The amnesty programme is expected to spur an apartment market that Colliers International said was subdued last quarter after “dismal sales” in 2015. Homeowners will be able to take out loans to purchase a second property off the plan, the central bank announced May 24.
The Jakarta Construction Property and Real Estate Index has jumped 6.4% from a two-month low on May 10. That's pared its loss over the last 12 months to 2.8%, compared with a 3.3% decline in the Jakarta Composite Index. Summarecon Agung has surged 20% since May 10 and PT Ciputra Development is up 13%.
Under the draft amnesty bill, a 2% to 6% tax rate will be paid on declared assets and this will drop to 1% to 3% if the money is brought back from offshore. The reprieve, which will apply to company and personal taxes, will last six months. It's likely to be implemented in July, Soepriyatno, the deputy chairman of the house's financial commission, told the Detik website May 26.
Bank Indonesia estimates the amnesty, which is aimed at plugging a hole in the government's budget to fund infrastructure development, will boost 2016 economic growth by 0.3 percentage point to as much as 5.4%.
That compares with a six-year low of 4.79% in 2015.
Only 27 million Indonesians are registered taxpayers and less than a million of them paid what they owed in 2014. – Bloomberg