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Astra International scales up property business

JAKARTA -- Indonesian conglomerate Astra International stepped up its presence in property development on Wednesday, unveiling a new division in response to weak performances in its established segments.

Among Astra's existing six business lines, automotives generate half of group revenue. The remainder comes from financial services; heavy equipment and mining; agribusiness; infrastructure and logistics; and information technology.

Astra reported a 12% decline in net profit year on year in the first half of 2016 due to weak contributions from its financial and heavy equipment divisions. Auto sales recovered in that period with a 4% increase to 273,000 vehicles.

Astra wants to maintain the "balance" between its auto business and other segments, including the newly added property business. Astra sees potential synergies between real estate operations and its existing business lines, according to David Iman Santosa, the new division's head.

"We see synergy amoung our businesses as being very important," Santosa told reporters. "Property may give added value to our other business lines, or the other business lines can give more value to property."

Astra Land Indonesia is a joint venture between Astra and Singapore-listed Hongkong Land. It is charged with the group's first property project of building an office tower and apartment block in Jakarta's central business district. Work costing 8 trillion rupiah ($616 million) began in 2014 and is due for completion in 2018. The 47-story office building, Menara Astra, will replace the holding company's headquarters in North Jakarta.

The three apartment towers, the Anandamaya Residences, have sold well despite minimal marketing efforts. More than 90% of the block's premium 509 units have already been sold, and the price per unit has nearly doubled from around 6 billion rupiah when they were first offered. The success has encouraged Astra to delve deeper into residential development.

Astra has two other residential projects planned: a joint venture 70-hectare township in East Jakarta targeting middle and upper income groups with developer Modernland Realty; and a housing complex in the southern part of the city.

Indonesia's property market has performed poorly in the past two years, but Astra believes its reputation will lift sales. "What matters to us when entering a new business is not speed," Santosa said. "We have to develop a strong brand from which we can grow steadily."

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