Indonesia Housing & Real Estate Business Strategy Report

Below are the general direction and strategies for our company’s property business in Indonesia.

1) Mid Term and Long Term Goals

 To contribute in improving the living environment in Indonesia by providing good quality
housing through our company’s projects.
 In order to realize this, we will establish our company’s development standards and expand
our business by partnering with companies who have the same standards and believe in the
same principles. Our end goal is to be able to develop projects on our own.
 Our goal is to be able to achieve a condition where our company can do “township
development with our company as the leader/major decision maker” in year 2030. As well
as achieving operating profit of 5-7 billion Yen for that same year.

 Illustration of our company’s business expansion

Our goal
High By increasing our level of Developing a township
contribution/involvement with our company as the
in a project, we obtain leader
know-hows in project
Our Company’s Contribution

management

Our current position

-Relying on our partner’s
managerial abilities

-Participating on small Absorbing know-hows of

scale projects township development

Low
Small Project scale Big
Year 2022 2025 2027 2030
(Last year of (Last year of (Last year of
Phase 1) Phase 2) Phase 3)
Amount of investment 24 170 250 400
(in hundred mio Yen)
Number of housing units 52 650 1,500 1,600-2,000
handed over
Sales revenue 0 0 49 180-200
(in hundred mio Yen)
Profit 4 4 24 50-70
(in hundred mio Yen)
Number of Japanese 4 4 6 6
expatriates
Number of local staffs 7 29 46 71
Amount of consolidated 24 85 242 360-400
sales revenue
(in hundred mio Yen)
Amount of consolidated 9 (37%) 11 (13%) 51 (21%) 70-100 (20-
profit 25%)
(in hundred mio Yen)

(1) General Direction

 By increasing the ratio of investment in small scale development projects, we
involve our company in more roles and obtain various know-hows in project
management. By combining several projects, we can achieve stable profit in each
term.
 We will involve our company in a large-scale township development and absorb the
know-hows of a township development.
 Strengthen the capability of SFI Property Development Business by hiring local staff,
accumulating and storing/recording project development know-hows internally.
 Year 2023-2030 are divided into 3 phases: Phase 1 (2023-2025), Phase 2 (2026 -
2027) and Phase 3 (2028 – 2030). We will gradually move from the current minority
and 50:50 joint venture ownership into majority ownership. As the amount of
investment and scale of projects increase, the return of investment also increases.
 We also aim to expand our business by owning properties and renting them out, as
well as acquiring a local developer’s company. These items are not yet reflected in
the above illustration.
 We hope to realize the above goals by 2030. For our goals after 2030, it will be
decided after assessing the company’s performance.
(2) Main Strategy Points
To achieve our goals, we will determine the strategy for each aspect and work our way to
reach each item’s goals.
Item
Product – Target Market
Area
Partner
Land Acquisition
Strategy
 Landed housing as the priority product.
 Target market is the middle class/middle income
households and above, (annual income USD 5,000-35,000)
which are currently increasing in number.
 Price range of the housing product: middle, upper-middle,
and high-end and must fulfil our company’s standards.
 Once we can become the main/lead developer of a
township development, we will also consider developing
commerce area, offices, hotels, warehouse complex, etc.
 Main target is in Jakarta capital area and its surroundings.
 For development in other regions, it can be difficult for
our company to take a leading role in the development
process. We will limit ourselves to projects and partners
that can be managed from Jakarta.
 We need to make sure that our partners pass our
company’s standards for partner choice. We will prioritize
projects located in certain areas so that if the partner
defaults, our company can use the call option and
continue the business operation on our own.
 Depending on the scale and content of the project, we will
also consider partnering with other Japanese companies
or the Japan Overseas Investment Corporation for
Transport and Urban Development (JOIN).
・ Not only jointly developing a land that is owned by the
partner company, we will also consider jointly acquiring
new lands together with our partner. We will also
consider acquiring large-scale lands for developing a new
township with our partners.
・ We will prioritize lands with HGB and HM status. We
need to be very careful when acquiring lands owned by
several individuals.
Organization  We will establish different divisions in relation to our
business expansion, such as Business Development,
Planning and Construction, Marketing, and also other
supporting divisions such as Human Resources, Legal and
Accounting.
 Heads of each division (manager) will be appointed and
each division has to be able to operate autonomously.
 We will determine and establish our internal standards for
scope of work/role, work specifications, and evaluation
system within the company.
Staffing  Recruitment of local staff will be focused on recruiting
people with previous experience.
 SFI HR department will conduct a training (about the
history of Sumitomo Forestry, accounting, legal, tasks
related to property development)

Technical  We will determine and establish our company’s standard

for housing and community facilities.
 We will make a recommendation to the Indonesian
government for improving the regulation of housing
standards, through the cooperation with Japan’s Ministry
of Land, Infrastructure and Transport (MILT) and Japan
International Association for the Industry of Building and
Housing (JIBH).
 As our environmental strategy, we will push for acquiring
EDGE certification.
Capital  For our future investments, the source of capital will be
mainly from SFI.
 We will push for the JV company to be able to pay
dividends as soon as possible, and manage the usage of
the capital fund as effectively as possible.
 For large scale projects, we will consider joint funding
with other Japanese companies.

Brand  We will create different brandings for our housing

products in each price range and increase public
awareness of our company.
 High end: Summarecon Bekasi & Makassar. Upper-middle:
GPI & Gapuraprima. Middle: Mustika. We will create
different brandings for each segment.
 Decarbonization  We will increase our housing products’ thermal insulation
capability through design and material selection. Also
reduce the amount of embodied carbon and operational
carbon in our housing products.
 Reinforced Concrete (RC) is the main method used in
buildings in Indonesia, so achieving Carbon Neutral status
through our property business alone is difficult. We will
research various methods, such as Joint Credit Mechanism
between Japan-Indonesia, coordinating with SFI’s other
businesses in Indonesia, while also implementing
decarbonization technologies when developing
townships.
Others  We will consider providing our customers with supporting
services, such as mortgage loans and other services
related to housing.

2) Product & Target Market Strategy

・ Indonesia’s current population is 270,000,000 people. It is predicted that the number will
exceed 330,000,000 in 2065. Average age is in the 20s, and it is predicted that the number of
population in the productive age bracket will reach its peak in 2055.
・ The amount of households with middle-class income (USD 5,000 to 34,999 annual income) is
increasing recently, with ratio of 70,3% in 2020.
・ There is a high preference for landed housing in Indonesia. Market for landed housing is
bigger than for apartments.
・ 50% of landed housing/shophouse sales in Jakarta area is dominated by properties with unit
price higher than USD 34,000/unit.
・ High-end housing such as our existing projects in Bekasi and Makassar with Summarecon has
a small market share. We will expand our business by participating in development projects
for middle-income households, and fulfil the demand for types of housing that has the
highest demand/sold the most.
・ By implementing our company’s standards for building houses and public facilities, we will
develop products that can target specific niche and differentiate ourself from other
companies.
・ Developers in Indonesia are not allowed to take a loan from banks for land acquisition, so
purchasing land must be taken from company’s capital. However it is allowed to start selling
housing products and receive money from customers before construction starts, so the
burden of construction cost is lighter. If sales condition is not good, we can delay the start of
construction to control loss. By dividing the project into several phases and only start
construction after a certain number of units are sold, we can get more stable revenue each
term and lower the risk of inventory overload.
・ By prioritizing development of landed housing, we can quickly obtain development know-
hows, improve our company’s ability in acquiring materials, and form partnerships with
contractors faster.

3) Area Strategy
 ・ Our priority is area within 1,5 hours drive (car/motorbike) from the center of Jakarta.
・ For expansion to regions outside Jakarta and its surrounding area, we will prioritize
partnering with companies who have a headquarter in Jakarta. (Ex: Summarecon - Makassar,
Sinarmas Land – Surabaya, GPI – Semarang, etc)
・ For new capital Nusantara in East Kalimantan, we will also consider it as a candidate location
once the capital moving process has really started. We will monitor the progress of our
existing partners who already own lands there (Summarecon, Sinarmas Land).

4) Partner Choice Strategy

 We will choose our partners according to the requirements on the table below. We are not
only looking for partner investors, but also looking for companies who agree with our vision
of “Providing good quality housing and improving the living environment” and also our
company’s standards. We will create a good track record so more companies will be willing
to work with us.
 In the future, we will also partner with small to middle-sized developers, with our company
as the majority stakeholder. We will choose projects in a good location, so that if the partner
defaults, our company can use the call option and continue the business operation on our
own.
 We will acquire township development know-hows by participating in township
development together with our partners. Depending on the scale and content of the project,
we will also consider cooperation with other Japanese companies (Kumagaigumi, Japanese
developers, JOIN, etc).
 There are a lot of examples in Indonesia where building housing, commercial area,
warehouse, etc within a township development caused the land price to increase. For now
we will partner with companies who are already experienced in developing townships, but
after 2030, we will try to limit the amount of outward investment and consider developing a
township on our own.

 Our requirements for partner choice:

Credibility Investigation Using the service of Kroll, we conduct an investigation of the

company as a whole and also the important management
people. There should not be any case of bribery, money
laundering or other major problems.

Proximity Investigation Conduct a hearing from the staffs of Sumitomo Forestry

group, clients, and existing partner companies, to see if the
company has any negative reputation.
Owner/management  The owner/management should have an understanding of
our goal to provide housing according to our company’s
housing development standards.
 We should be able to directly meet and talk with the
owner/management/decision maker of the company.

Development Track The company’s previous products are of good quality and are
Record viewed positively by their customers.
 Organization
Financial Condition
 The company should not only own lands, but also has
experience as a property developer.
 However, once we reached the stage where our company
can function on its own as a property developer, we can
also partner with companies who only provide land.
 The company’s financial report is audited annually, and
can be checked/confirmed.
 The company has to have a certain level of financial
capability and financial health, and a certain level of
collateral margin.

Continuity and ・ We should consider possibility for long-term partnership

Expandability when choosing partner (already own plots of land for
future development, able to acquire new land)
・ The company should be able to participate in jointly
acquiring new lands with our company.

 Comparison of partner companies based on their scale/size

Partner Large scale developer Small, middle scale developer

Company Size
Advantage  Has good reputation and high  Financial power and
capability as a developer, so organizational capability are
development process can go relatively weaker, so our
smoothly. company can lead and
 Their large number of land become the majority
inventory will make it possible to stakeholder.
have a continuous partnership.  Projects will be mainly
 If it’s a listed company, there is a focused on small scale
certain level of information projects with lower selling
transparency, financial power, price.
and the risk of defaulting is also
low.

Disadvantage  They can work on middle-class  Difficult to understand the

housing projects on their own. A actual managerial situation
lot of their projects offered for of the company.
partnership are only for high-end  There is a higher risk of
market. defaulting.
 There is a strong intention from  Most of their projects are
the partner company to take the small scale, so it is
majority position. mandatory to check their
product’s quality.
 Strategy  Even with a smaller amount of  As our company’s capability
capital contribution, our company
can be involved in a large-scale
township development that we
cannot do on our own.
 We aim to build a deep, long-term
relationship with big developers
such as Summarecon and
Sinarmas Land.
in project development
improves, we will take the
majority position.
 Project location must be
considered carefully so that
in an emergency situation,
we can operate on our own.
 We need to choose
partners who can agree
with our company’s
standards and goals.

5) Land Acquisition
 We will not only develop on a land owned by partner company, but also will jointly acquire new
lands with our existing partners. For regions where we already have experience in developing
and already know the market situation well, we will also consider acquiring large scale land for
township development and aim for a long-term profit as the land price increases.
 We will prioritize lands with HM and HGB status which are relatively easier to acquire. For
purchasing lands owned by several individuals, we will proceed very carefully.

6) Organizational Strategy
(1) SFI Organizational Development
 Our goal is for our company to be able to operate as a property developer on our own by 2030,
by increasing the number of local staffs.
 By referring to our experience when participating in JVs and also looking at the organizational
structure of other developers, we will create different divisions with different functions in the
company and appoint the person in charge of each division. (GM, manager). Each division
should be able to operate autonomously.
 In relation to work performance, our company will create a guideline regarding the scope of
work, as well as work standards/specifications. We shall use said guideline as the basis to
evaluate workers’ performance. We will create a fair evaluation and remuneration system, as
well as career advancement system.

 SFI Property Division Organizational Goal (number of personnel by the end of each phase)

Organization 2022 End Phase 1 Phase 2 Phase 3 Roles

Expatriates 4 4 6 6 Communication with HQ,
optimizing overall works,
leading each division,
managing JV company

Business 2 6 8 8 Negotiating with partner

Development companies, market analysis,
creating business plan,
business expansion, compile
data for management
meetings
 Design/ 1 5 9 15 Designing our company’s
Planning standards, making design
drawings, managing
construction process, choosing
materials, tendering and
procurement

Construction 1 5 9 15 Implementing our company’s

standards on the project site,
managing construction,
maintenance, town
management
Sales & 0 4 7 10 Creating marketing & branding
Marketing plans, product sales plans,
advertisement, sales support

Finance, 1 4 5 9 Managing accounts and funds,

Accounting, Tax tax

HR, GA, IT 1 3 5 8 Hiring personnels, training,

performance evaluation,
system management

Legal, Permit 1 2 3 6 Management of contracts,

supporting the process of
acquiring all types of permits,
land acquisition

Total 11 33 52 77

By the end of Phase 3 (2030), we estimate that we will have 6 expatriates and 71 local staffs.
However, this is not a fixed number. We will expand our company and hire people after
determining what roles are necessary.

 For now, the only process where our company is the lead is the preparation of JV agreement.
Finance, accounting and tax are currently handled by the partner company. However we have
created a system where after the JV is established, payments by JV will need approval/signature
from both our side and partner’s side.
 In Phase 1, we will be involved in: business development ideas, creating building concepts,
interior design planning (our company will lead), land acquisition, design and planning for
master plan, site plan and landscape, construction work including selection of contractor. We
will also increase our involvement in marketing and absorb the necessary know-hows.
 In Phase 2, we will be involved in: setup of JV companies, the entirety of the planning stage,
quantity survey and absorbing know-hows for creating a marketing plan.
 In Phase 3, we should already have the necessary know-hows. We can conduct all activities
(except acquiring lands with Girik status) on our own. However, even if we already have the
know-hows, for tasks with high difficulty such as land acquisition, we need to carefully decide if
we will actually do it ourself.
  “Our company as the lead” doesn’t always mean that we will do everything internally. Even
after understanding the legality and the necessary know-hows, we may still ask for help from
experts or consulting companies.

Division Role Current Phase 1 Phase 2 Phase 3

Situation
Business Business Planning
Developmen JV Agreement
t
Legal, Permit JV Company Setup
Land Acquisition -HGB, HM
Land Acquisition - Girik
Obtaining permits
Writing up contracts/agreements
Accounting, Accounting, finance, tax
Tax
HR & GA HR & GA
Design & Master plan
Planning Site plan
Landscape
Building concept
Building core design
Building details design
Structural calculation
Interior design
Material selection
Construction Quantity Surveying
Selecting contractors
Tendering
Ordering construction work
Managing construction progress
Safety management
Community management
Marketing & Creating marketing plan
sales Promotional activities
Sales activity

Partner company leading Done by partner company or consulting company

Joint work More than 50% is done by partner company. Our role is focused on checking and approval.

Our company leading More than 50% is done by our company or consultant

(2) Recruitment and Human Resource Development

 From 2022 to 2024, we will prioritize on hiring people who will become managers and assistant
managers on each division.
 We will strictly evaluate candidate’s capabilities and personality during the hiring process.
 We will prepare a training system to provide education about Sumitomo Forestry’s history,
accounting, legal, and tasks related to property business. We will also consider creating an
internship program together with universities that have a strong track record for departments
related to property, such as Tarumanegara University.
 We will try to train our personnel to have a broad knowledge. We will create a system that will
enable activities such as sharing work contents through regular meetings, increasing the level of
understanding between different divisions, actively participating in tasks beyond one’s division.

Phase 1  Hiring personnels who will become part of managerial positions

 Direct instruction from expatriates, transmission of knowledge and
values
Phase 2  Hiring staffs to put under the managers
 Utilize help from external organizations (consultants, etc) to create
a staff training system

Phase 3  Start hiring fresh graduates

 Implement training system through the HR department

7) Technical
 We will create our company’s development standard with the goal of providing good quality
housing. In cooperation with SFC Overseas Technical Construction Department, expatriates with
technical background and also with SFC Housing Main Department, we will continue
researching the system in Indonesia.
 Housing standard in Indonesia is regulated by law, with the details laid out in SNI standard,
ministry regulations and other regulations. However, the content is basically the same housing
standards from the USA, and its effectiveness in Indonesia is still unclear. In low-rise buildings
such as low-rise housings, the actual implementation is not always following the regulation.
 While we deepen our understanding regarding the local standards and regulation, we will
formulate our company’s own standard, not just for housing but also standard for community
infrastructures.
 As a long-term goal, we also want to make recommendations to the Indonesian government to
revise/improve the standards of low-rise housing, through a cooperation with Japan’s Ministry
of Land, Infrastructure and Transport, JIBH, and Japan Embassy. By pushing for a more suitable
regulation, we can contribute to improving the quality of low-rise housing in Indonesia.
 Based on the result of our research up until now, below is the general outline of our company’s
housing standards (tentative):

a. Community standards

General standard Major developer/township Our company’s

development standard standard
Water -PAM water -PAM water -PAM water

-If not available, use - If not available, use well -If using well water,
well water water must conduct water
analysis first to make
-Necessary piping and sure there is no harmful
storage tanks are paid and substances.
installed by developer
-For large scale
development, will also
consider building
storage tanks.
Waste water -Toilet waste (black -Basically the same with -Toilet waste treated in
water) is only treated the general standard. septic tanks. Will
once in septic tanks. conduct periodical
No periodical -There are cases where the maintenance through
maintenance. developer builds a small- township management
scale sewage treatment or resident association.
- After treated in plant to treat the sewage
septic tanks, before it goes into rivers. -Install grease trap or
together with other (Summarecon Bekasi, Lippo filter to treat grey
types of household Cikarang) water/other household
wastewater, it flows wastewater before
directly into rivers. flowing it into rivers.

-For projects more than

1,000 units, we will
consider building a
small-scale sewage
treatment plant
Soil -There are cases -Soil test and soil bearing - Same with major
where soil test and capacity test (CBR) are developer/township
soil bearing capacity conducted during land standard.
test during land preparation.
preparation are not
conducted. -If necessary, also conduct
preloading.

Environmen -Conduct AMDAL -Same -Same

t review
 Building -Selling products - Building extension and -Same with major
extension with the premise renovation is regulated. (As developer/township
and that buyers will do part of purchase
alteration building agreement/contract)
extension/renovation
the future

b. Building standards

General standard Major developer/township Our company’s

development standard standard
Soil testing -There are projects -Conducts soil testing such -Same with major
that don’t conduct as boring, and Swedish developer/township
soil testing sounding test

Structural -Doesn’t conduct -Conducts structural -Conducts structural

calculation structural calculation. However, in calculation and
calculation order to provide a maintain the required
competitive price, budget level of earthquake
- Even it is limitations may cause resistance as regulated
calculated, the earthquake resistance to be in SNI.
earthquake reduced.
resistance is low
Building -Reinforced -Reinforced concrete or -Reinforced concrete
structure concrete other specific/unique - Implement strategy to
method avoid non-structural
-There are cases brick wall from
where brass is used -There are cases where collapsing (steel
the main precast method is used, reinforcement, etc)
reinforcement. such as Modernland and
Panasonic Home -Consider using
methods that can be
done in a short time
but still having stable,
good quality material,
such as precast method
or prefabricating.

Waterproofing -Area around -Same -Other than installing

windows only sealant, also consider
waterproofed once the design/shape of
(using sealant) openings to prevent
water coming in
-Roof shape is
designed without -Wall cracks supression
considering (using fiber mesh, etc)
possibility of rain
water coming in -Design roof shape to
prevent rain water
coming in
 Termites -Dispersing anti- -Same -Other than dispersing
termite poison on anti-termite poison on
the ground the ground, if the cost
allows, we will also
periodically inject anti-
termite substance
through pipes that are
buried underground.
(Already tried
experimentally in
Bekasi project)

Environmental Almost no -Same -EDGE certification

environmental
strategy at all -Will utilize solar-
powered electricity
generator

Verifying -Simple verification -Uses independent -Check and record all

Material checklist, but the person data by SFI technical
Quality who conduct the team
verification may not check
it properly -Checklist items:
foundation, steel
reinforcement,
concrete, waterproof,
electrical wiring, piping,
finish, etc

Safety -None -None (responsibility of -Will formulate our

(responsibility of contractor) company’s safety
contractor) standards (helmet,
footwear, safety
measure activities)

(8) Capital
 Up until now, capital funding source is from Sumitomo Forestry Singapore which is then
injected into the JV company. But from now basically all capital source will be from SFI.
Everything will be managed through one source which is SFI. Profit from businesses in Indonesia
will be reinvested in Indonesia. This will reduce the amount of tax when paying dividends to SFS
and also reduce the risk from fluctuation of exchange rate.
 According to the corporate law in Indonesia the requirements for paying dividends are: 1)
Company must have positive profit in the financial year, 2) the amount of profit reserve must be
more than 20% of the capital invested. For JV companies that have reached this milestone, we
will calculate its future capital demand and there is surplus capital, we will pay the dividends or
reduce the capital (after discussing with partner company).
 For large-scale development and long-term projects which need a large amount of capital
investment, to comply with SFI’s risk management criteria, we will consider requesting
cooperation from Kumagaigumi, other Japanese developers or JOIN.
  For projects where we have to pay construction costs in advance before receiving revenue from
sales (middle and high-end housing in a township, commercial facilities, etc) we will consider
getting a loan from bank or shareholder’s loan.

 Tax difference based on capital source

Capital source Singapore Indonesia

Dividends 10% 0%
Profit 10% 15%

(9) Branding
 We will establish 3 different brandings within SFI Property-Housing: High-end brand, upper-
middle, and middle. Even for different projects with different partners, we will use the same
brands and increase public’s awareness towards our company as a property developer. Along
with establishing our company’s standards to differentiate from other companies.
 For branding strategy and brand names, we will consult with local branding consultant and also
discuss with related departments.
 “Sumitomo Forestry” is barely recognized by the Indonesian public. Most Indonesian people
consider “Sumitomo” as one group. Even though our company has existed for over 50 years and
for more than 10 years of that we also have subsidiary companies, but we have never
established any kind of branding.

(10) Decarbonization
 We will continue our strategy to reduce embodied carbon and operational carbon from our
housing units.
 We will construct housing with reduced operational carbon amount, by using both passive and
active design. In Summarecon Bekasi we designed the units with eaves and wing wall that act as
shields from sunlight (passive design). In Summarecon Makassar, other than implementing
passive design, we are also considering to use the more environmentally-friendly LED lights as
an active design. We will also design natural air circulation with Sumitomo Forestry’s ryo-onbo
concept to help reduce the use of air conditioner, and therefore reducing the amount of
operational carbon.
 In choosing the construction materials, we will compare between regular materials and
materials with low embodied carbon and consider which to use. Usually materials with low
embodied carbon are more expensive, but we will try to use them while still maintaining the
cost. Example: using cement that is manufactured with low CO2 emission, using ALC/hebel
instead of red bricks. To keep the cost low: using precast method, concrete blocks.
 We will continue the process of obtaining EDGE certification. The process of obtaining EDGE
certification for the model house in Makassar is on progress. We are planning to make all of our
model houses to be EDGE-certified. A building can apply for EDGE certification by reducing the
amount of water usage, embodied carbon and operational carbon by 20% (compared to normal
amount).
 Choosing toilets, water taps and shower products that can help save water. We will also
consider utilizing rain water for landscaping, etc.
 Since the most common construction method in Indonesia is using reinforced concrete,
achieving carbon neutrality with only our property business is difficult. However, we will still
continue to push for reducing the amount of embodied and operational carbon. We will also
consider obtaining credit from JCM. For example, using the garbage from townships as fuel to
generate electricity. We will research and consider methods to achieve carbon neutrality,
including coordinating with other divisions, for example creating a balance between the amount
of carbon emission from property business and the amount of greenhouse gas absorbed by our
forestry business in Indonesia.
Reference Data

6. Creating Our Company’s Development Standards

1) Core Line of Thinking (Building Quality & Standard of Infrastructure)
 Structural construction method will use RC method which is the most common method
used in Indonesia. We will not consider wooden construction because the cost is higher
and more difficult to apply waterproofing and anti-termite. The number of skilled
worker available in Indonesia is also limited. We will follow SNI standards for structural
design and leak-prevention methods.
 Compared with Japan, there are fewer complaints from customers regarding structure,
rainwater leaking, wall cracks, and traffic line inside the house. Sales promotion
materials usually emphasise on items that are easy to spot visually, such as equipment
upgrade (sanitary, tiles), smart system, etc. In order to provide products that fits the
market demand, we will provide ideas based on the result of discussion with our
partners, but we will also aim to improve the quality of housing to provide comfortable
living for Indonesian people.
 Usually housing units in Indonesia are handed over to buyers with only minimum
amount of furnishing. After handover, the owner will do the interior work by
themselves, such as kitchen equipments and furnitures. However recently there are a
small number of housing products sold in furnished condition. We will investigate the
possibility to sell our products in furnished condition.
 There is a tendency in Indonesia to buy a house with a larger land area, and then
renovate the house according to changes in their lifestyle and income in the future. In
communities that we are developing, we will provide a system where future
renovations by home owners can be managed. We will also improve the quality of our
housing products so that no more renovations in the future will be necessary.
People’s awareness and expectation towards housing products are continuously
changing. The younger generation now prefer simple & modern designs and fully-
furnished house, with no need for further interior work or renovation.
 In Indonesia, a system where developers build infrastructures and then charge the cost
to house owners doesn’t exist. If it is not a project that is planned and budgeted by the
government, infrastructures built by developers are basically given for free to the
government. In exchange for constructing large-scale infrastructures that are not
directly related to the housing project, the developer can get a relaxation regarding the
floor-to-land ratio and building-to-land ratio in their project.
 Once the infrastructure is handed over to government, it will be difficult to make
changes to the development plan, make upgrades or maintain the infrastructure
according to developer’s standard. However by holding to the infrastructure, the fixed
asset tax will become developer’s responsibility.
 Infrastructures that were built exclusively by residents maybe not recognized by the
government. Water-related infrastructures (for clean water, wastewater) are usually
never constructed/managed without permission from the government. Before
executing our ideas, we should confirm to the government through our partners or a
consultant.
 Peil Banjir is a regulation regarding determined floor level height that needs to be
followed to avoid damages from flooding. We will assess risk of flooding and conduct
land structuring based on the Peil Banjir.
  For electricity cables, burying the cables underground will make the landscape looks
more beautiful, but the cost will be higher. We will consider using half buried and half
ground cable installation.

2) Water Standards
a. Current Situation in Jakarta
 Number of population and demand for water in Jakarta are increasing, but the volume
of water that is used as the source of PAM water (from Ciliwung River, Cisadane River)
is not enough. Even though there has been several plans for increasing the volume of
water, the implementation has been delayed. Rate of PAM water distribution in Jakarta
is still stuck in 45% from the total number of households. (Meanwhile, in areas where
our projects are located: Bogor 23%, Bekasi 18%, Depok 17%, Tangerang 30%).
 Because of that, many people are still using underground water as water source.
Overuse of underground water has been causing land subsidence.
 Since year 2000, land subsidence measured up to 2 meters has occurred in North
Jakarta. Approximately 60% of the city’s area is now located under the sea level. This
could also negatively affect both overground infrastructures (bridges, buildings) and
underground infrastructures (clean water pipes, sewage pipes, gas pipes). Land
subsidence is an urgent matter that needs to be taken care of by creating sustainable
development within the city of Jakarta.
 45% of underground water is contaminated by fecal coliform, and 80% by E. coli. The
main causes of contamination are leakage from septic tank, untreated household
sewage, landfill leachate, and industrial waste.

 Water & Sewage System used in projects related to our company:

Company Name Project Name Water Sewage

(Our company
participated)
Summarecon Morizen Bekasi PAM Septic Tank + Private
Sewage treatment
plant
Morizen Makassar PAM Septic tank
Company Name Other projects located Water Sewage
near the area that we
will develop
Sinarmas Land Lumihouse PAM Septic tank
GPI Evergreen PAM Septic tank
Mustika Land Annie Underground Septic tank
water
GPRA Llanos PAM Septic tank
OBP PG3 PAM Septic tank

b. Ideas for Our Company’s Clean Water Standards

 While still considering the cost and feasibility in mind, our company’s standards for
water system are as follows:
 Use PDAM water in areas where the infrastructure is already available.
  If PDAM or other suitable water source are not available and underground water must
be used, we will first conduct water quality analysis to confirm that the water is not
contaminated.

3) Sewage Treatment Standards

a. Current Situation in Jakarta
 Distribution of sewage pipes in Jakarta is stopped at 11% (per 2017), and has
contributed to the contamination of public water bodies (rivers, etc) and underground
water.
 To solve this problem, regional government of Jakarta has divided Jakarta into 15
regions and created sewage pipe construction plans in each area. A sewage pipe
construction plan funded by JICA loan is also a part of those plans. Japanese general
contractors such as Kumagaigumi are participating in the tendering process.
 Even though Indonesian PUPR Ministry has established a standard for sewage water
qualities such as pH and BOD value, there is no standard for household sewage. So the
Jakarta Governor Directive (Keputusan Gubernur) which has a lower standard is used as
the baseline. For areas in Jakarta where sewage piping is not available, the only sewage
treatment equipment that is used is a septic tank for treating sewage/black water from
the toilet. Other types of household wastewater are not treated and are directly
dumped into gutters and rivers, causing contamination of rivers and underground
water.
 Septic tank that is only for toilet waste was also used in Japan before. But since the
output BOD value was 8 times higher compared to using joint septic system which also
treats other household wastewater, the regulation regarding septic tanks was revised in
1999. From then, new installations of septic tanks which only treats toilet waste is
prohibited.
 In Indonesia, many septic tanks don’t have the correct specification, don’t have the
appropriate structure and also not maintained regularly, which caused them to not able
to remove BOD effectively. The effectiveness of septic tank in removing BOD is around
30-60%, and it will decrease further after the waste is treated in sewage treatment
plant. This is also why septic tanks are not maintained regularly.
 In order to produce sewage with better quality, it is necessary to be connected to
sewage piping network built by the government or install the joint septic system.
However, since there are only a few areas where sewage piping is already available, and
since many developers are reluctant to install joint septic system due to invisible initial
cost, most places still use cheap and low quality toilet septic tank.

 Difference of required sewage quality between PUPR Ministry regulation and

household sewage quality (Governor’s regulation).

Unit Quality of sewage Required quality Household

at input point based on PUPR sewage quality
Ministry
regulation
pH - 6–9 6–9 6–9
BOD mg/L 300 30 75
COD mg/L 400 100 100
TSS mg/L 240 30 50
 Ammonia mg/L 50 10 10
Oil/ mg/L 40 5 10
grease
Bacteria amount/100ml - 3000 -

 Wastewater Treatment System That Has Been Confirmed in Indonesia

① Public Sewage Treatment Plant ② Private Sewage Treatment Plant

Overall  In Jakarta, this facility is only available in
Central Jakarta. Coverage ratio is 11% out
of the entire Jakarta area. （per 2017）。
 There is a plan to construct sewage
pipings to cover 80% of Jakarta by 2050.
JICA is also participating.
 Needs a high level of technical expertise,
high amount of cost and large scale
construction
 Used by developers such as in Summarecon
Bekasi, Summarecon Serpong and Lippo
Cikarang.
 Operational cost is charged to
residents/customers as a monthly fee.
 Sewage from several housing clusters are
treated in one plant.
 Need a significantly large area of land.
 First, the toilet waste goes through septic tank
in each house, and then together with other
types of wastewater, they are carried to the
treatment plant via an exclusive pipe network.

BOD 20mg/L 30mg/L

Cost By the government Around USD 336,000 /1,000 ㎥ or 1,250
households.
＋ Cost of septic tank in every household
③ Septic Tank ④ Joint Sewage System
Overall  Used in most households. Cheap and low
quality.
 Only treats waste from toilet. Other types
of household wastewater are directly
dumped into rivers without treatment.
 Depending on the developer, sometimes
grease trap is installed to treat kitchen
waste.
 Manufactured by Japanese company, DAIKI
AXIS INDONESIA
 It has the same capability with the sewage
system in Japan. But since there is no
regulation from the government to enforce a
better sewage quality and the price is
expensive, most housing development projects
in Indonesia don’t use this.

BOD 60mg/L 20mg/L

Cost USD 110-200 /unit USD 2,500 /unit

b. Ideas for Our Company’s Water Standard

 If our project is located in the area where public sewage piping is available, we will use it.
 For areas where the public sewage piping is not available, we will try to reduce the negative
effect to environment, such as underground water quality, to the minimum.
 For example, by improving the route of piping that is going into the septic tank, providing
better maintenance, and also consider installing pre-septic tank or post-septic tank
treatment measures. If the project is large-scale with more than 1,000 households, we will
also consider building a treatment plant.

4) Structural Standards.
a. Indonesia’s Construction Law
[System and Implementation]
・ Technical standards for construction in Indonesia is regulated by law under the SNI.
Implementation of SNI is optional, but part of the SNI is mandatory, called the
Mandatory SNI.
・ Implementation of mandatory SNI depends on each regional government, so
negotiation with each corresponding regional government is necessary. So far, each
regional government’s has different responses regarding if it necessary to follow
mandatory SNI.

[Mandatory SNI]

・ There are 4 provisions related to RC structure, which are [earthquake resistance],

[load], [concrete], and [rebar]. These standards are based on USA’s International
Building Code, ACI (for concrete) and ASCE7 (for earthquake resistance).
・ There are 3 types of earthquake resistant design in mandatory SNI, [Special Moment
Frame], [Intermediate Moment Frame], and [Ordinary Moment Frame]. Which method
 to use is based on the soil strength and level of earthquake risk in the project area.
Jakarta area is categorized as “area D” and should use the SMF method.
・ With SMF method, a building can swing flexibly during an earthquake, so it can absorb
the earthquake force and resist strong earthquake. This method is usually used in high-
rise buildings. While IMF and OMF reinforce and increase rigidity of a building to make
it earthquake-resistant. These methods are usually used in low-rise buildings.

b. Situation of structural construction in low-rise housing projects in Indonesia

・ We conducted hearing from our existing partner companies (and partner candidates)
regarding their implementation of mandatory SNI related to structure. According to the
regulation, SMF method should be used in Jakarta area, but none of our partner
companies implement this. Some even don’t include earthquake force in structural load
calculation. We have also asked construction consultant and experts, but we couldn’t
confirm any low-rise housing projects that used the SMF method.

[Why the mandatory SNI standards are not implemented]

1. The minimum column thickness for SMF (300mm) creates a shape that is difficult
to be accepted by the market
・ The column shape creates an inconvenience when designing, increases cost
and more difficult to construct, so it is unacceptable for developers. (based on
hearing from partner candidates)
・ Low-rise housing used to be constructed using non-reinforced bricks framed
with a concrete frame. Columns in homes didn’t exist. It is possible that the
current method, which is RC reinforced concrete is the remains from this .

2. The standards in Mandatory SNI is considered too much for low-rise housing
・ Based on the hearing conducted with a consultant, mandatory SNI is
considered too much for low-rise housing.
・ SNI is based on standards used in USA, where 90% of low-rise housing is made
of wooden construction. There are no separate standards in the SNI for low-
rise housing in Indonesia.
・ In Japan, structural calculation standards for high-rise and low-rise building are
different. For low-rise it is simpler.
3. Regional government doesn’t check the structural calculation of low-rise
housing projects
 ・ For low-rise buildings (lower than 7 floors), to obtain permit from government
only design drawing and some main construction boundaries. Structural
calculation is not checked.
・ After permit is obtained, government employees don’t come to the site to
check. So, buildings that don’t follow mandatory SNI also exist.
・ For high-rise buildings (8 floors and above), details are inspected by a special
institution, and there are site inspections during construction phase and after
construction is finished.

c. Our Company’s Structural Standard

 We will use IMF method for low-rise housing. Using Etabs software, we will calculate
and produce design that fulfils the IMF standards. We will also consult with local
regional government before starting construction in each project.
 Why we choose IMF:
 According to SNI standards, Jakarta area should use SMF, but the standard is more
suitable for high-rise buildings. We think that for landed housing, IMF is more
suitable.
 Based on the result of consulting with Haerte, Arup, Kumagaigumi, as well as
internal staffs who are responsible for structural, it is concluded that IMF method is
more effective. The reasons are as follows:
1. SMF is more suitable for high-rise buildings, while for low-rise housing IMF is
more suitable.
2. With IMF, columns can be hidden inside the walls. (With SMF, columns will be
thicker and protrude out of the walls)
3. By appropriately placing flat columns in both X and Y axis, we can make sure
that we can fulfil IMF standard without disrupting the floor plan.
・ The above standards are for buildings up to 3 stories high. For buildings taller than that,
we will use the service of engineering consultant and follow the mandatory SNI
standards.
・ We will use these standards for our future projects. The construction cost is estimated
to be higher, but if this makes the profitability and feasibility of our projects to become
worse, we might abandon this idea.

Methods based on SNI standard

 Current practice in Indonesia

Column width same with brick width Minimum column width is 300 mm Because the column shape is (flat?), it
can resist earthquake force from both X
Doesn’t consider earthquake risks at Column will protrude from the wall and Y axis.
all, or earthquake resistant is low

d. Issues and Future Plans

Issues Progress & Plans

Other than IMF, we ・ Increasing the rate of overlapping between columns in
should consider other different floors, creates floor plans that are structurally
methods that are both simpler
durable and cost- ・ Consult with Haerte, Kumagaigumi, etc for other ideas
effective
Understanding the cost ・ We will implement our company’s standards in all our
needed to change our confirmed projects
partner’s structural plan ・ For projects that we are still considering, we will do a
to conform with our comparison study
company’s structural
standard
Considering methods to  By building units that are connected to each other, we can
cut down costs, such as improve the stability of the structure, reduce the number
using connected and width of columns in each unit, and also reduce
building method construction cost. We will consider constructing a wide
column inside the parting wall between units.
 We will study if this feasible (in legal and construction
aspect)
 Current Situation: Structure is planned and built separately for each unit

Our plan (tentative): Plan and build the structure of houses in the same row as one structural body

e. Independent Safety Precautions

 Along with the improvement of our structural standards, to further increase the building
resistance, we have also considered adding the following standards. We have finished
verifying information and currently making adjustments to add thi as our standard.
① Regarding non-structural brick walls that are not covered in SNI, this type of wall can
endanger human lives if it collapses. We will add steel reinforcements through the
structural columns. Based on the data from Architectural Institute of Japan’s Journal
of Technology and Design, this method has been confirmed to be effective for
resisting earthquake force.
② To control cracks on the external wall, we will install mesh sheet similar to the ones
used in Japan on places where cracks are easy to occur. By suppressing cracks, not
only will the wall retain its aesthetics, it will also prevent conditions that can cause
water leaking from the cracks.

5) Soil testing and soil improvement standards

a) The current situation in Indonesia
 In housing cluster developments, soil testing to determine the ground strength is done by
using boring test and Sweden sounding test.
 Points for boring test differ depending on the shape and size of the land, but usually there
are 5 points; 4 in the perimeter and 1 at the center.
 If the soil is considered strong enough, then the foundation will use footing reinforcement.
If not, pile foundation will be used.
 In low-rise housing development, depending on what the land was used for before and
what it will be used for, there are cases where developers plan the footing foundation or
piling without conducting soil investigation.
 In case of Summarecon, other than embankment work that is common in Indonesia, they
also conduct preloading by putting weight that is similar to the weight of building that will
be constructed. By doing so, ground settlement can progress before the actual
construction start and the ground strength can be determined.
  For preloading of a 2 storied housing, embankment surface is created at 2-3 meters higher
than the ground level in the drawing plan and then natural pressure will be applied. If the
monitoring plate doesn’t sink further than 5mm in 5 days, it passed requirement. After
that, the soil is removed/dug until reaching the foundation level.

b) Our company’s standards

 Conduct soil investigation to confirm soil quality and strength, and then plan for the
appropriate foundation plan.
 If the situation cannot be improved with foundation reinforcement, soil strength should be
improved by preloading or inserting RC piles.
 For preloading method, we will use Summarecon’s standard as reference, which is
observing a certain level of ground settlement in a certain period of a time.

6) About EDGE certification

 EDGE is a system developed and managed by IFC, an organization affiliated with the World
Bank. Utilizing this system, we will provide environmentally friendly housing products by
calculating the amount of energy and water savings from the planning stage, up to
operational carbon and embodied carbon of each building.
 EDGE certification can be obtained if our project can save more than 20% of water and
energy compared to the average usage in other projects nearby. There are 3 different
grades to the certification, depending on the amount of operational carbon that is reduced,
namely 20% reduction, 40% and 100%.
 Our company will try to obtain this certification and will plan/design with this in mind.

7) Management of Construction Quality

 Based on our hearing from Summarecon and also from field inspections in Bekasi project,
we have found several items that need to be repaired or improved. For our future projects
we should consider using this as our new baseline standard. We will also continue to
conduct investigation to find problematic items and create improvement plans.
 Leakage: Improving the fitting around the window sash
 Cracks on external wall: installing crack inducing joint, installing glass fiber net on the
external wall surface.
 Prevention of non-structural brick wall from collapsing: additional installation of
steel reinforcement structure
 Termite prevention: Build a system of underground pipes where we can inject anti-
termite substances into it regularly. (optional)
 For the overall construction quality, (other than the above mentioned items), we will
conduct research to see the local situation in each project and note what kind of
material/quality is needed. However, we will also create a general guideline for
construction quality that needs to implemented in all our projects
 Using the guideline as the basis, we will conduct inspection on each stage of construction .
We will use Summarecon’s inspection list as a reference and conduct inspection for the
following items:
 Roping off building site inspection, reinforcement inspection, piping and wiring inspection,
concrete inspection, framework inspection, confirmation of interior and exterior materials,
waterproofing inspection, inspection of openings, external finish inspection, final
inspection.
8) Cost Management
 At the present, together with Summarecon we are doing cost management scheme as
follows. We will create a system so that we can do all of these on our own:
 Conduct planning and quantity survey to ensure all is within budget
 Tendering based on design drawing and quantity survey information
 Conduct overall assessment and choose supplier
 Receive invoice from contractor according to the determined payment terms
 If additional work is necessary, the workflow would be as follows:
1. Receive construction order from developer → contractor do the work
→submit additional work report → approved by developer →release
invoice→payment
 By implementing the above system and accumulating information, we should be able to
understand the construction cost for existing projects as well as new projects. We should
be able to make more appropriate decisions when planning for new projects.

9) Material Recommendation
 We will create a list of materials that we have used in our projects. Including its cost,
capability and workability, and utilize the list when choosing materials for our new
projects.
 We will gather information regarding material quality improvements, and consider to use
such improved materials in our projects.