Carrying out social distancing, as mandated by the government, is no doubt our most basic civic duty during the Covid-19 pandemic. Protecting public health trumps business. Property operators are now resigned to inescapable eventualities. ‘Zero’ mall visitor; ‘zero’ hotel occupancy; ‘zero’ exhibition.
A heartbreaking number of staff has been made redundant. A meltdown is imminent. During this grave time, we have a responsibility to secure staff employment as much as we can. We need to maintain their income, livelihoods and dignity.
In light of this, we kindly implore the Jakarta government to consider granting property operators reliefs on the property tax (Pajak Bumi dan Bangunan or PBB). Such move can avoid more bankruptcies. The relieved funds will lift pressure off tenants, pay for staff salary and stop mass unemployment.
Commercial properties such as hotels, exhibition halls and malls are battered. These are businesses with high fixed costs, made worse by the Covid-19 protocols. Even without visitors and activities, these properties still have to perform basic services and maintenance.
Operators are now bleeding. The number of tourists in Jakarta in May this year was down by 87% compared with the same period last year, according to the national statistics agency BPS. Starred hotel occupancy levels plunged to record lows: 12.7% and 14.5% in April 2020 and May 2020 respectively. Closing down of hotels is financially more sensible than serving a handful of guests. Exhibition halls are dead. Restaurants, shops, salons, supermarkets—whose businesses are sinking as a result of the government-imposed Large-Scale Social Restrictions (Pembatasan Sosial Berskala Besar or PSBB)—are now unable to pay service fees and rents.
Jakarta’s retail and foot traffic plummeted by 63% on 11 April 2020, dived further by 52% on 7 June 2020, slumped deeper by 28% on 11 August 2020, according to Google Mobility Report. Malls in Jabodetabek and Surabaya employ about 414,700 people as shopkeepers, cooks, waiters, cashiers, security guards, parking wardens, gardeners, engineers, cleaners and building managers, according to Jakarta Property Institute (JPI) estimates. There are 80 malls of varying sizes in Jakarta that employ 160,000 retail staff. Many have been made redundant, the rest are feeling insecure.
These are the hardworking people toiling in hotels, exhibition halls and malls whose lives are our greatest concern; whose livelihoods were altered overnight by the government-imposed PSBBs, leaving property operators with no choice. When PSBB were implemented between 10 March and 23 April 2020, their workplaces closed, their incomes to support families dissipated.
With this in mind, on behalf of our vulnerable workers, operators of malls, hotels and exhibition halls request that Jakarta grant a total relief of PBB for the previous, ongoing and future PSBB periods, if any. This should also apply to billboard, restaurant and other taxes. Adjustment to these tax rates should be extended for non-PSBB periods as the aftermath are still vividly felt.
The pandemic warrants a shift in how DKI Jakarta views commercial properties. Far from being virus clusters, malls and hotels can be the most controlled public environments. Professionally managed, they enforce high international standards and transparent communication of data for swift responses. New clusters are in fact found in uncontrolled public and private environments. Afterall, these property operators have an inherent responsibility for public safety to start with, even under normal circumstances.
Jakarta’s commercial property industry is already burdened, making it a risky business to venture into. Formal land valuations (Nilai Jual Objek Pajak or NJOP)—which form the basis for PBB—has been up exponentially over the past years despite the recent slowdown and then Covid-19. Affordability issues are becoming more acute.
As part of obtaining construction permits, developers are obliged to build public facilities and low-cost housing. Yet, many of them are simply not constructable in the first place, resulting in unpredictable delays in obtaining permits. In Jakarta, construction permits—or Izin Mendirikan Bangunan—for commercial buildings take at least 21 months, far longer than other cities, according to JPI research. Permit uncertainty would add to Jakarta’s challenges in attracting investments after the pandemic.
The property industry is the lifeblood of Jakarta’s economy. In providing space, it spurs a multiplier effect that impacts 171 sectors across the value chain, from construction and banking to retail and telecommunications. In 2019, even during a downturn, the property and construction industries contributed significantly to Jakarta’s economy: 17% to GDP; 28% of foreign direct investment, according the official statistics. The property and construction industries employ 6% of Jakarta’s workforce, but the retail, accommodation, and restaurant industries—all of which are enabled by the properties that they are in—employ a whopping 36% of the workforce.
Given its outsize role, Jakarta’s intervention is desperately needed. If left to the market, it would recover too slowly. A case in point was after the 1998 financial crises. Jakarta waited three long years for a major development to take place: Cilandak Town Square. It was three years too late! Many investors had looked elsewhere. And as if affordability is not troubling residents enough, the pandemic gives them more reason to flee Jakarta.
We greatly appreciate Jakarta for the discounts on PBB in 2020. But the fact remains that the hike in NJOPs is beyond affordability; property operators confront uncertainty now and in 2021; mass unemployment is looming. The collapse of incomes of shopkeepers, cooks, waiters, cashiers, security guards, parking wardens, gardeners, engineers, cleaners and building managers would leave them without a safety net and dignity. A PBB reprieve can save tenants and our hardworking employees. This is an emergency. Let’s help them together.