Preference-Based Feasibility Study for Premium Apartments in Indonesia

Abstract

This research aims to analyze the most optimistic scenario of a financial feasibility study for apartment product in South Bekasi, Indonesia. The location was selected due to the plan by the property developer to conduct a development in the area. It is a premium apartment enthralled-market towards differentiation strategy; by providing luxury facilities; however, the market response is negative. To determine adequate facilities, apartment unit size, and unit prize, the authors have evaluated the most feasible scenarios. These scenarios are developed using the worst to the very optimistic patterns that can be achieved through financial analysis. A market survey was conducted to analyze customer preferences. There are nine factors of customer preferences that have been analyzed in this research encompassing specific location, design and concept, facilities, accessibility, liveability, reinvestment value, the reputation of the developer, physical quality, and floor plan. Data were collected from a total of 252 respondents, consisted of apartment owners and future apartment owners. This study used descriptive statistical analysis via average analysis. The market survey results were then used to develop the scenarios for feasibility studies in this research. Nine scenarios were carried out to evaluate the most optimistic feasibility study. All the scenarios produced positive NPV and accepted IRR, with Payback Period faster than the required and/or requested time. The smallest IRR produced is 12.45%, which is higher than the Weighted Average Cost of Capital of 10.9%. These findings show that even in the worst situation, this project is feasible to use the modified assumptions discussed earlier.