Report Overview

An increasing number of infrastructure development, housing, and commercial building projects; rapid migration of people from rural to urban areas; and the government’s initiatives and policies to provide affordable housing are expected to drive the Indonesia Construction Market during the forecast period between 2024 and 2030.

Indonesia Construction Market – Industry Trends & Forecast Report, 2030

Indonesia Construction Market size was estimated at USD 268.54 billion in 2023. During the forecast period between 2024 and 2030, Indonesia Construction Market size is projected to grow at a CAGR of 7.1% reaching a value of USD 425.92 billion by 2030. A prominent driver of the market is the Indonesian government's substantial investment in infrastructure projects, including roads, bridges, airports, seaports, and railways. These initiatives aim to enhance connectivity, reduce logistical costs, and drive overall economic growth. Indonesia's construction sector also benefits from strong foreign investment, with global companies actively participating in various projects through collaborations and partnerships with domestic firms. Additionally, the Millennium Challenge Corporation, in collaboration with the United States and Indonesian governments, is investing USD 649 million to improve infrastructure financing and support micro, small, and medium-sized enterprises. The rising population, urbanization, and growing middle class are further fueling demand for residential properties, prompting increased construction of homes. In 2023, the government introduced measures such as value-added tax and reduced fees to make housing more accessible for low-income buyers.

Construction – Overview

Construction refers to the process of building, assembling, or creating infrastructure, buildings, or other physical structures. It encompasses a wide range of activities, including site preparation, design, planning, and the actual erection or installation of materials and components. Construction can involve residential, commercial, industrial, and infrastructure projects, such as roads, bridges, airports, and utilities, and typically requires the collaboration of architects, engineers, contractors, and workers. The goal of construction is to transform designs into functional and durable structures.

Indonesia Construction Market

Growth Drivers

Government’s Initiatives and Policies to Improve Infrastructure

The Indonesian Government’s initiatives to improve infrastructure have significantly boosted the growth of Indonesia's construction market. The launch of the National Strategic Projects (PSNs) in 2016 under President Joko Widodo has been a key driver, encompassing over 200 infrastructure projects and 12 programs valued at USD 351.2 billion. These initiatives include the development of roads, dams, and clean water facilities, with strong government support in areas such as land acquisition and project implementation by state-owned enterprises (SOEs). To finance these projects, the government has tapped into private sector investments, which account for 67% of the funding, along with contributions from SOEs and the state budget. Additionally, public-private partnerships (PPPs) and innovative financing platforms, such as the Indonesia Infrastructure Guarantee Fund (IIGF) and the Indonesia Investment Authority (INA), have been established to mobilize private funds. As these government-led initiatives continue to expand, they play a pivotal role in driving the growth of Indonesia's construction market by addressing infrastructure needs and ensuring long-term economic development.

Challenges

Shortage of Skilled Labor in Construction Sector

The shortage of skilled professionals in the construction sector has become a significant challenge, impacting project timelines, costs, and overall productivity. Despite rising demand driven by urbanization and infrastructure projects, there is a growing gap in available skilled workers. This shortage leads to project delays, increased labor costs, and decreased quality of work. Addressing this issue requires promoting construction as a viable career, investing in training programs and apprenticeships, and adopting technology to streamline processes. Without resolving the skilled labor shortage, Indonesia Construction Market's growth and ability to meet future demands will remain constrained.

Impact of Escalating Geopolitical Tensions on Indonesia Construction Market

Geopolitical tensions can have a multifaceted impact on Indonesia Construction Market by introducing uncertainties that affect investment and construction activities. Rising tensions may disrupt supply chains, leading to delays in the procurement of materials and equipment. Additionally, increased political instability could reduce investor confidence, slowing the flow of foreign investments essential for large infrastructure projects. Trade restrictions and higher costs for imported goods can further escalate project expenses. As geopolitical risks intensify, Indonesia Construction Market faces challenges in maintaining steady growth, potentially hindering the completion of key infrastructure projects and overall economic development.

Indonesia Construction Market

Segmental Coverage

 Indonesia Construction Market – By Type of Construction

By type of construction, Indonesia Construction Market is divided into Buildings Construction, Heavy & Civil Engineering Construction, Specialty Trade Contractors, and Land Planning & Development segments. The buildings construction segment holds the highest share in Indonesia Construction Market by type of construction. The buildings construction segment is the dominant force in Indonesia's construction market, significantly contributing to the sector's overall growth. This segment encompasses a variety of project types, including residential, leisure and hospitality buildings, office structures, outdoor leisure facilities, retail spaces, and other commercial constructions. Major urban centers like Jakarta and Surabaya are witnessing a surge in both residential and commercial developments, driven by increasing urbanization and a growing middle class. Notable projects, such as the Jakarta-Bandung High-Speed Rail and the revitalization of older urban areas, exemplify this growth and underscore the focus on modern infrastructure and living spaces. Investments in tourism, hotels, and data centers are expected to further drive the growth of the commercial sector. Despite facing challenges such as rising material costs and regulatory hurdles, the Indonesian government is committed to improving infrastructure through public-private partnerships, which is anticipated to bolster the buildings construction segment even more. With both domestic and foreign investments on the rise, the building construction market in Indonesia is projected to continue its upward trajectory, addressing the increasing demand for housing and commercial facilities while enhancing urban living conditions.

Indonesia Construction Market – By Type of Contractor

Based on type of contractor, the Indonesia Construction Market is split into Large Contractor and Small Contractor segments.

Indonesia Construction Market – By End User

On the basis of end user, the Indonesia Construction Market is bifurcated into Public and Private segments.

Competitive Landscape

Major players operating in Indonesia Construction Market include Chiyoda Corp, Toyo Construction Co Ltd, Hyundai Engineering & Construction Co Ltd, Samsung C&T and Corporation, McConnell Dowell, Adhi Karya, PT PP (Persero), Wijaya Karya, Waskita Karya, and PT Jaya Konstruksi Manggala Pratama. To further enhance their market share, these companies employ various strategies, including mergers and acquisitions, partnerships, joint ventures, license agreements, and new product launches.

Scope of the Report

By Type of Construction

• Buildings Construction

• Heavy & Civil Engineering Construction

• Specialty Trade Contractors

• Land Planning & Development

By Type of Contractor

• Large Contractor

• Small Contractor

By End User

• Public

• Private