Why Current Indonesian Greater Jakarta LRT Bekasi line might never be continued to Tambun, Cikarang, and Karawang
Indonesia has had an Infrastructure development boom in the past 5 years, which is a very good thing but people have been talking things that might’ve not been so real. In order not to over-expect what our government is doing, it could be better to take a step forward and check the actual development of this government project.
Disclaimer: A lot of things written here are have been curated based on facts and news, but some of them are from the author’s own opinion. Even though cautious checkings has been done by the author, but since nobody is perfect, there is a slight possibility of misinformation. Opinions expressed within the content are solely the author’s and do not reflect the opinions and beliefs of the website or its affiliates.
2015 was a historical year for Indonesia, where groundbreaking of a lightweight transit system for our beloved capital city of Jakarta is finally there. Even though we’re actually way late compared to neighboring developing nation on this public transit thing (Bangkok did their Sky Train in 1999), but at least the government shows something when they actually start constructing. At US$ 35 M/km, LRT was supposed to be the ‘cheaper solution’ to alleviate traffic in Greater Jakarta, compared to MRT at double of that (US$ 70 M/km, while actually high-speed rails in China could cost as low as US$17M/km). It seems that the idea is that, for the short-run, MRT would serve the Jakarta city itself while LRT shall serve the Greater Jakarta areas at half the cost/km. However, taking a look at the current ticket pricings of US $0.35~1.0 per trip, it does not seem that LRT shall price itself at half of that, since half of US$0.35 is only US$0.18 which is even cheaper than Commuter Trains. In some news, it was even already mentioned that the fare would start at US$ 0.8/trip. Probably the idea is that LRT should achieve faster profitability/breakeven compared to MRT.
On the other side, it seems that the repayment of the LRT construction fund shall not only come from ticket fares but also from selling TODs (Transit Oriented Development) in LRT stations, which is a good initiative but probably could have been much better so it could sell better as well (I’ll talk about this later on another post why current LRT City could be much more attractive, at least in my opinion).
Before we continue, I’d like to state that I’m not attacking/condemning anybody since this is a strategic government decision, I’m merely expressing my sadness of not being able to take the LRT as I live 18 km away from furthest LRT line. But it’s just a bit sad since I think that I pay taxes like everybody, and I think people who live near my place also pay the same taxes as we should. In fact I am not against any reasonable increase of tax that I have to pay as long as I do get better public services, such as this public transport, and provided also that it could be done very efficiently as well.
Anyways, the short answer to the above question is the following 2 things:
- Land Issue
- TOD (Transit Oriented Development)
There could probably be more answer, but since I’m a civil engineer so I think my brain could only process the above 2 reasons. You could comment below if you’ve found more reasons of that.
Okay, let’s check the news below
Pemkab Bekasi Ajukan Perpanjangan Lintasan LRT Sampai Cikarang — Suara Jabar
“Final Stop is still at East Bekasi” said Head of BPTJ (Greater Jakarta Public Transit Authority)
Basically the news said that in 2019, the government of Bekasi Regency located in Cikarang asked the LRT line to go further to their place, but the reply wasn’t really satisfactory that looks more like they immediately decline to review the request. Probably they have reviewed the top 2 answers above as well, we never know.
Land Issue
The first reason, in which I think this is one of the most important item, is land. We all know land is scarce, but you might ask that it should not be so hard to build on the edge of the Toll road right?
The thing is, LRT needs land, and they have been given a land on the edge of the toll road until East Bekasi. The below picture provides good representation of the location of the LRT. It is located in the northern side of the toll road, the elevated toll is in the middle, and HSR (High speed rail) is on the southern side.
Okay, so it seems that the expectation is that as long as there is room for LRT on the north side of land, LRT could keep going east to serve Bekasi Regency areas of Tambun, Cikarang, and Karawang. This is possible as long as 3 things are kept in place: (1) HSR needs to stay at southern part, (2) Elevated toll road stays at the middle, and (3) LRT stays at the northern part.
The question is that, can we guarantee that the 3 things (HSR, Elevated Toll Road, LRT) are kept in place along the line?
The answer is sadly, NO.
After the LRT stops at East Bekasi (KM 18 of the Line), the Elevated toll road shifts to the northern part as shown in pictures below.
As seen in pictures above, Elevated toll road shifts location from the middle part of the road towards the northern part of the road. Should the LRT shall continue to be constructed further east, land acquisition needs to occur before the development could actually happen. This ideally should be solved by if we don’t have problem no 2, which shall be discussed later on.
Hypothetically speaking, if the original LRT line was ever intended to go further east, a space should ideally be allocated to accomodate for that, but it seems that the plan is to really stop in East Bekasi and not to continue, since the Elevated Toll Road takes their place after their last stop at East Bekasi.
Based on these facts, I could conclude that probably there might not be a government plan to extend our LRT line further east in the first place, at least not in this 5-year administrative period.
TOD
Here are the facts of LRT development available on the media right now.
- Cost/km of LRT construction = IDR 467 B/km or US$ 32.2M/km (Source: CNBC Indonesia)
- Proposed Lines: Cawang-Cibubur; Cawang-Kuningan-Dukuh Atas; Cawang-Bekasi Timur; Dukuh Atas-Palmerah Senayan; Cibubur-Bogor; Palmerah-Grogol/Bogor (Source: CNBC Indonesia)
- Lines currently being developed: Cawang-Cibubur, Cawang-Dukuh Atas, Cawang-Bekasi Timur (3 lines only)
- Total Length of LRT line (3 lines only) = 44.43 km
- Total Rough Estimated LRT Budget (3 lines only) = US$ 1.43 B
- Current Loan amount: IDR 23.45 Tn / US$ 1.6 B, this pretty much matches the amount at item number 5 for only 3 lines. (Source: Kumparan)
LRT might be able to increase their revenue streams by doing as follows.
- Sell Naming Rights. The 3 lines of LRT have in total 18 stations. Should 5 stations’ naming rights be sold, LRT shall have the revenue as follows. Looking at the case of MRT, only 1 naming rights was priced at US$ 2.3 M while the other transactions are roughly at US$ 0.2–0.35 M (Source: Kompas). The 3 lines of LRT have in total 18 stations. Should 1 station be sold to a special client at US$2M, and the other 5 stations’ naming rights be sold to a common client each at US$0.2 M, LRT shall have the revenue of US$ 2 M + 5 x US$ 0.2 M = US $3 M. This is too small as it only covers 0.2% of the construction cost, even should be less than the Softcost incurred for LRT (Softcosts = cost of hiring consultants, e.g. architects, engineers, etc).
- Retail Revenue. ARR (Average Rental Rate) of Jakarta is about US$20/m2/month. Since Jakarta Real Estate is still not very familiar with REIT, we could only assume that the only revenue could only come from Recurring Retail Leases. This might not be too much. Even if we have 500 m2 of NLA (Net Leasable Area) in each stations, the revenue from 18 stations would only be US$ 21.6 M in 10 years. Even assuming net profit of 30%, which is considered very high, the result is only US$ 6.5 M (Only 0.45% of Construction Cost). This is not yet accounting that major tenants shall pay less than specialty tenants, and risk of occupancy.
- TOD, this is the easiest way to get cash upfront after only 3 years of development (Loan amount is 17 years).
LRT City is a TOD product from Adhi Karya, a govt construction company doing the LRT project. From their website (www.lrtcity.com) it is shown that they have about 11 active projects.
In order to know a realistic sense of the possible revenue & profit from the LRT city development, we might need to find out their development GFA (Gross Floor Area). A few samples of the above projects have been surveyed from Google Maps and land plot area was estimated as below.
Even though the above screenshots will never be able to represent all 11 projects of LRT City, but it is safe to say that probably the range of land plot sits in between 1.7 ~ 5.5 Hectares. Even though the average will then be 3.6 Hectares, we shall use 3.0 Hectares (a discounted number) for a more conservative estimate. The numbers shall be as below.
- Number of projects: 11
- Average Land Area: 3.0 Hectares
- Assumed FAR (Floor Area Ratio)/KLB: 5 -> Total GFA: 150,000 m2/land
- 30% of area is assumed to be retail, 20% of area shall be assumed to be converted to other uses & carpark, remaining GFA for residential shall be 50%.
- Residential GFA: 50% x 150,000 = 75,000 m2
- The Total Residential GFA for all 11 projects: 825,000 m2.
The mix between residential and commercial may be subject to judgement from LRT City management, since commercial shall also obtain recurring revenue or even being sold to REITs, however in this case we’re assuming LRT City is chasing after fast cash from residential units, since it is true that ‘Cash is King’ anyways. This is something also that I’d like to comment, on how they’re planning and selling their LRT City, which I think could still be much improved, probably in the next post.
The area of carpark & other uses might also not be 20%, as carparks need to be calculated for roughly 1 carpark for 5 apartment units, and in Jakarta it is required that if the unit’s bigger the ratio of carpark shall be affected.
Looking up online, the cheapest LRT city apartment that I can find is about US$ 40,000 / IDR 570 Mn (Source: Rumah.com) for a studio apartment with the area of 24.5 m2, resulting a cost/m2 of US$ 1,600/m2 (IDR 23 Mn/m2). Of course as we go nearer to city centres, the prices go up. Some other areas start at US$55,000 for a studio apartment, resulting at about US$2,100/m2.
For this estimation, we shall assume not using a median price of $1,850/m2 but we’re gonna use $1,700/m2 for a more conservative estimate.
Looking at the possible total revenue: GFA x Price/m2: 825,000 m2 x US$1,700/m2: US$ 1.4 B, the resulting number is very close to the total estimated budget at US$ 1.43 B (see calculation above).
Even though we know LRT city might’ve done their best for cost optimization, but let’s assume that they’re still doing a not-so-efficient cost/m2 at US$482/m2 (IDR 7 Mn/m2). Skipping the math, let’s assume that the LRT City achieves an EBITDA of 33% and Net Profit at 25%. Total Net Profit of LRT City sales shall be at US$ 350 M (accounting for 25% of LRT construction cost). This did not yet account for revenue from retail areas, as they could be sold at higher the price of residential apartments, or if they’re gonna be leased, they shall have recurring retail revenue.
This did not yet adjust if LRT City’s price shall escalate in the next coming years, or any possible increase of GFA due to bigger land elsewhere. Increasing the average landbank from 3 hectares to 5 hectares/LRT stop could generate cash that could fund the LRT project not only by 25% but could be 40%, means that almost half of the project required funds could be achieved by selling TOD products.
However, it has been proven that out of the 3 above revenue sources (Naming rights, retail income, and TOD) the best source of cash shall be TOD. There is always an issue of liquidity that since we are currently on the bearish market and property is not liquid at all it became harder to actually sell it all, that is a different issue that I’ll gonna talk about in another post.
What’s the impact towards possibility of LRT going further east?
This makes the problem of LRT coming further east even harder. In order to generate cash and ensure the profitability of LRT, LRT City prefers to find empty spot to build an LRT City development shall need to be able to fund at least 25% of the required cash. This is not a wrong business decision, but is it a correct social decision?
However, taking a look at the next possible stops of the Jakarta-Cikampek line, most of them has been acquired by private developers in areas like Cibitung, Tambun, Cikarang, and even Karawang.
Looking at the current condition, should the LRT management still looks for ‘profitable spots’ instead of ‘populated spots’, the LRT developer will not get much profit going east, even though it actually helps the society since we could get to work to Jakarta easier.
Plus, extending the line further east could probably cannibalize their own LRT City TOD product, since people could possibly buy further locations at a cheaper rate, reducing the number of prospectus buyers from buying their product. Actually this might not be a big problem if the business plan of LRT City could be updated a little bit, but probably that’s a story for another day.
We should also not really avoid competition as customers would always be happy if companies are fighting with each others by creating better products at a more competitive rate. Competition forces companies to rapidly innovate or die, and without good competitions companies would just innovate at a normal pace and has less need for efficiency for lowering prices as well. Not mentioning also that competition forces companies to hire for better talents with better payscale as well, which could also benefit society as a whole and the engineering discipline itself. Without competition companies will feel okay by hiring only mediocre talents by global standard, which is a pity since this nation needs to thrive globally to finally become a developed nation.
Again, will it happen or not, I am not so sure, but as mentioned, it seems that they did not plan it for this 5-year administrative period or so, so we could only hope that the next government administration could take a look at this issue, as we are an equal taxpayer as well.
My opinion is that, looking at the above 2 reasons (Land issue & TOD) there is a very high chance that we will never see it happen, especially if our government stays this way. There are actually more ways to generate cash and build all LRTs at the same time, especially at the time where bank interests are very low. We could find ways to build LRTs & LRT cities more efficiently to alleviate our cash to serve more people at a cheaper cost. 1MDB fund did a not-so-good example but at least they did an effort to build their nation. I also do believe that with some efforts extensions of routes like this could be done while achieving commercial benefits as well, such as PPP (Public-Private Partnerships), doing another TOD down the line, creating new development complexes, and so on. In fact, in Jakarta, such commercialization of public works are very feasible compared to other regions where the GDP and population are much lower.
Bonus: Reasons why you should extend the LRT line further.
Looking at the picture above, it could be seen that actually Bekasi City & Regency has 7 Mn people in total, and in fact more people live further east compared to the west Bekasi City area. Shouldn’t it be logical to extend the LRT line further east to serve more population?
This is something that we hope our next government could answer.
