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Astra International takes an extra $137m stake in developer

Indonesian conglomerate pushes deeper into property business

JAKARTA -- Indonesia's largest car distributor, Astra International, is raising its stake in the developer of a township on the outskirts of Jakarta for an additional 1.8 trillion rupiah ($137 million), marking its latest push into the real estate business.

Astra's 50-50 joint venture with Singapore-listed Hongkong Land will raise its stake in Astra Modern Land, which will develop a township about 20km east of Jakarta, from 50% to 67%. Both Astra and Hongkong Land are affiliates of Hong Kong conglomerate Jardine Matheson Holdings.

The deal "presents an opportunity for the group to increase its land ownership and to develop it," Astra's property unit said in a statement Wednesday. Modernland Realty, a local property developer that will hold the remaining 33% through a subsidiary, announced the transaction earlier this week.

AML will develop a mainly residential 666,000-sq.-meter site in the township called Jakarta Garden City, with construction slated to begin by the end of the year.

With land prices rising in the capital, Jakarta Garden City aims to tap growing demand for affordable housing in nearby areas. The project has already attracted two big commercial tenants. Japan's Aeon plans to open its second shopping center in the country at the end of September in the development, and Swedish furniture company Ikea is also expected to open an outlet. Located between the capital and the eastern region of Bekasi, home to many industrial parks, the township is well placed to attract shoppers from a wide area, according to an Aeon official.

Astra has partnered with Japan's Toyota Motor in cars and Honda Motor in motorcycles, among others, and has a commanding share in both markets. The company generates about half its revenue from other businesses, including mining equipment, crude palm oil and financial services.

With its existing businesses maturing, Astra has positioned property and infrastructure as pillars of its future growth. The company is building an office tower and apartment block in Jakarta's central business district and a housing complex in the southern part of the city.

Greater Jakarta is one of the world's largest metropolitan areas, with a population of about 30 million. Still, some observers are raising concerns over a glut of apartments and condominiums.

Indonesian conglomerate Lippo Group began selling 168,000 condominium units in a massive township project called Meikarta on the eastern outskirts of the capital during the second quarter of this year. This alone accounts for about 80% of the units available in greater Jakarta, according to U.S. property consultant Cushman & Wakefield.

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