One of the biggest winners from an Indonesian tax amnesty may turn out to be the shares of real-estate developers, as funds get channelled into investments in the nation’s houses and apartments.
Bank Indonesia estimates about 560tn rupiah ($42bn) of undeclared income will be repatriated as a result of the reprieve. In a country where less than 0.2% of people own stocks, a chunk of this is likely to eventually be spent on real estate, according to PT Manulife Aset Manajemen Indonesia. The amnesty, together with a relaxation of mortgage rules and falling lending rates, may feed a resurgence in property stocks.
“Regulations are being sorted out, interest rates are easing and liquidity may increase once the tax amnesty happens,” said Alvin Pattisahusiwa, the Jakarta-based chief investment officer at Manulife, whose Indonesian unit oversees around $3.3bn. “One by one, the keys are being turned.”
PT Summarecon Agung has led a rally in real-estate shares over the past four weeks amid signs the tax reprieve, first proposed in early 2015, is getting closer. 
The amnesty programme is expected to spur an apartment market that Colliers International said was subdued last quarter after “dismal sales” in 2015. Homeowners will be able to take out loans to purchase a second property off the plan, the central bank announced May 24.
The Jakarta Construction Property and Real Estate Index has jumped 6.4% from a two-month low on May 10. That’s pared its loss over the last 12 months to 2.8%, compared with a 3.3% decline in the Jakarta Composite Index. Summarecon Agung has surged 20% since May 10 and PT Ciputra Development is up 13%.
Under the draft amnesty bill, a 2% to 6% tax rate will be paid on declared assets and this will drop to 1% to 3% if the money is brought back from offshore. The reprieve, which will apply to company and personal taxes, will last six months. It’s likely to be implemented in July, Soepriyatno, the deputy chairman of the house’s financial commission, told the Detik website May 26. Bank Indonesia estimates the amnesty, which is aimed at plugging a hole in the government’s budget to fund infrastructure development, will boost 2016 economic growth by 0.3 percentage point to as much as 5.4%.
That compares with a six-year low of 4.79% in 2015. Only 27mn Indonesians are registered taxpayers and less than a million of them paid what they owed in 2014.
Indonesians favor investing in property as they believe it’s safer in the long run, said Rainier Gunawan, a principal for Ray White Indonesia in Jakarta. Some 466,250 Indonesians had brokerage accounts at end-2014, according to the Indonesian Stock Exchange, out of a population of 256mn.
“In recent months purchases of properties for investment reasons have ground to a halt,” said Gunawan. “My clients are telling me they want to wait for clarity on the tax amnesty regulation.”
Residential sales should rise by around 10% this year as a result of the tax reprieve, mortgage rule and easier credit conditions, said Anthony Yunus, a property analyst at Nomura Holdings Inc in Jakarta. It will be positive for developers, and those with the most exposure to the residential market, such as Summarecon, PT Bumi Serpong and Ciputra Development, will benefit the most, he said.
Developers that have decreased the size of houses and apartments to make them more affordable will be the biggest winners, according to Bernard Kie and Hasira de Silva, analysts at Fitch Corporate Ratings Group in Jakarta and Singapore. 
These include Summarecon, Bumi Serpong, PT Lippo Karawaci and PT Pakuwon Jati, they wrote in an e-mailed response to questions. The more expensive end of the market stands to benefit from the tax reprieve.
“The key issue in the Indonesian residential property market currently is that buyers of mid- to high-end residential properties have large amounts of undeclared income,” said Kie and de Silva. “The imposition of the tax amnesty should help overcome this and encourage buyers to declare more of their income, thereby stoking fresh demand.”