Other BriefingsIndonesia’s Construction Market: Growth Drivers and 2030 Forecast
Indonesia’s construction industry has become one of the country’s primary growth engines. In 2024, the sector is valued at approximately US$273.15 billion, contributing nearly 10 percent of GDP. The industry’s momentum is driven by large-scale state infrastructure projects, accelerating urbanization, and rising foreign direct investment (FDI).
For foreign investors, understanding these dynamics and the forecast through 2030 is critical for capturing opportunities in this expanding market.
Market overview 2024 and segment breakdown
The construction sector expanded by 7 percent in real terms in 2024 and is projected to reach US$312.84 billion in 2025, exceeding US$535.98 billion by 2030 with an estimated CAGR of 11.4 percent.
Infrastructure remains the largest segment, driven by national connectivity programs. Residential and commercial projects account for around 40 percent of total output, while industrial and energy projects are growing rapidly as Indonesia accelerates industrialization and renewable energy development.
Labor and equipment capacity are tightening as project demand rises, highlighting the importance of early workforce and supply chain planning for foreign entrants.
Key growth drivers
National infrastructure strategy
Under the RPJMN 2024–2029 (Rencana Pembangunan Jangka Menengah Nasional), Indonesia’s five-year National Medium-Term Development Plan, the government targets infrastructure investment at around 5 percent of GDP annually.
The US$27.6 billion allocated in 2024 reflects a 5.8 percent year-on-year increase. More than 200 National Strategic Projects (PSN) worth 6.4 trillion rupiah cover logistics corridors, ports, and urban transit systems, many structured as Public-Private Partnerships (PPP) to attract foreign participation.
Capital relocation to Nusantara
Nusantara is Indonesia’s most ambitious urban project in decades, with a US$35 billion masterplan integrating sustainable energy and smart city infrastructure. The government allocated 48.8 trillion rupiah (US$3 billion) for 2025–2029 to fund core development phases. Early engagement gives foreign investors access to high-value residential, infrastructure, and technology contracts in a long-term mega-project.
Urbanization and housing backlog
The housing backlog is estimated at 12.7 million units, with annual demand rising by 600,000–800,000 households. The urban population is projected to hit 68 percent by 2035, driving vertical and mixed-use residential development. Middle-class expansion is fueling both affordable and premium housing demand, creating diverse investment opportunities.
Regulatory reform and FDI growth
The OSS Risk-Based System has cut licensing timeframes and eased foreign ownership restrictions in certain sub-sectors. Construction-related FDI reached 219.9 trillion rupiah (US$13.7 billion) in early 2025, up 12.7 percent year-on-year, signaling growing international investor confidence.
Industrial and energy expansion
Industrial zones and renewable energy are shaping high-value construction demand. PLN’s US$172 billion renewable roadmap through 2040, including 31.6 GW of new capacity by 2033, is generating opportunities in power generation and transmission. Foreign investors with expertise in industrial-scale infrastructure are well-positioned to benefit from this trend.
Market forecast 2025–2030
The industry is projected to grow 7.2–7.5 percent annually, reaching US$535 billion by 2030. Commercial construction, valued at US$55.18 billion in 2025, is expected to hit US$81.8 billion by 2030. The data center construction market is forecast to grow from US$3.05 billion to US$7.11 billion at an 18.4 percent CAGR, while industrial and logistics assets are set to expand by 9.2 percent CAGR.
Regional growth is shifting toward Kalimantan, Sulawesi, and Sumatra as Nusantara and decentralized infrastructure projects reshape the geographic distribution of opportunities.
Challenges and risk mitigation
Foreign investors must navigate land acquisition delays, mandatory SBU and SKK certifications, and currency exposure. Early local partnerships can ease compliance and land procurement, while localized supply chains mitigate import cost volatility. Currency hedging and early licensing roadmaps are essential for competitive positioning in tenders.
Strategic considerations for foreign investors
Market entry often involves establishing a BUJK PMA for direct project execution or a BUJKA representative office for working through local partners. Aligning early with regulatory and competency standards is crucial.
Joint ventures with domestic contractors provide faster access to priority projects, while PPP participation offers structured pathways into large-scale infrastructure with shared investment models.
Labor, capacity, and ESG trends
Labor shortages and equipment demand are pressing challenges. The construction machinery market is expected to reach 25,430 units by 2030, growing at a 4.1 percent CAGR. Investment in workforce training and SKK certification programs provides both compliance advantages and operational stability.
Sustainability is becoming integral. Projects in Nusantara and major cities increasingly require green building standards such as LEED and GBCI.
Foreign investors offering energy-efficient, ESG-aligned designs are gaining an advantage in securing international and government-backed contracts.
Positioning Indonesia’s construction market for investors
Indonesia’s construction sector is entering a decade of sustained growth, driven by infrastructure expansion, urban housing demand, and industrial development. With the market expected to surpass US$535 billion by 2030, foreign investors have an opportunity to participate in one of Asia’s most dynamic industries. Success requires early positioning in priority projects, a clear entry structure, and alignment with regulatory and ESG standards..
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ASEAN Briefing is one of five regional publications under the Asia Briefing brand. It is supported by Dezan Shira & Associates, a pan-Asia, multi-disciplinary professional services firm that assists foreign investors throughout Asia, including through offices in Jakarta, Indonesia; Singapore; Hanoi, Ho Chi Minh City, and Da Nang in Vietnam; and Kuala Lumpur in Malaysia. Dezan Shira & Associates also maintains offices or has alliance partners assisting foreign investors in China, Hong Kong SAR, Mongolia, Dubai (UAE), Japan, South Korea, Nepal, The Philippines, Sri Lanka, Thailand, Italy, Germany, Bangladesh, Australia, United States, and United Kingdom and Ireland.
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