Foreign Property Ownership in Indonesia: A New Horizon

August 11, 2023
Posted in News
August 11, 2023 veps

Amid the sprawling islands and diverse cultures of Indonesia, there’s a burgeoning interest in the property from overseas buyers. Yet, despite relaxed regulations aimed at attracting foreign homeowners, the uptake remains surprisingly muted.

This sentiment comes despite Indonesia’s efforts to ease property buying for foreigners. According to the 2021 government regulation on land rights, foreign nationals need only provide immigration documents, such as a passport or visa, to purchase the property. Previously, long-stay and permanent-stay permits, or Kitas and Kitap, were prerequisites.

Industry players suggested local officials might be reluctant to expedite the property permit process for foreigners and still demand additional documents like Kitas and Kitap as they face backlash from locals who might oppose the foreigners’ presence.

Rusmin Lawin, the Real Estate Indonesia (REI) deputy chairperson, emphasized that Indonesia shouldn’t be apprehensive about the rise of foreign property ownership, particularly when drawing parallels with neighbors like Singapore and Malaysia.

“Singapore has been open to foreigners since the 1970s. Today, foreign individuals owning property there are only 30 percent after decades of being open,” he said. “Malaysia opened in 1996, and the foreigners who own property there are not more than 5 percent.”

Also, Rusmin pointed out that foreign property markets tend to concentrate in areas with a lot of jobs for them or in tourist destinations.

“The market consists of two segments. First, expatriates who are already working here… In Jabotabek, there’s a potential income of Rp 20 trillion [$1.3 billion] in the foreigners market,” he said. The second segment is the tourist destinations: “Bali, Lombok, Batam… will experience a boom because people can now buy properties.”

The government set several stipulations in place on the type and price of housing available for foreign buyers. For instance, in Jakarta, foreigners must spend a minimum of Rp 5 billion on a house or Rp 3 billion on an apartment. There’s also a cap on the land area for individual foreign homeowners, which is set at 2,000 square meters.

Drawing a parallel with global practices, Rusmin said foreign property ownership should help Indonesia attract global talent. “We are the last country in Southeast Asia that allows foreign property ownership. We are behind Thailand and Vietnam already.”

“Europe is actively promoting the golden visa, and America has its EB-5 program. Without foreign ownership, it’s like being invited to my house but only being allowed in the living room, not the kitchen,” Rusmin said, emphasizing the need to allow foreigners a fair chance at property ownership in Indonesia.

While Indonesia has been fostering an environment conducive to foreign property ownership, the uptake remains unexpectedly low. According to the Spatial Planning Ministry, only 36 foreign homeowners have been registered so far in 2023. Foreigners typically purchased property through local nominees, particularly in well-known tourist locations like Bali. This made it difficult to trace foreign property ownership.

While the intent to attract foreign homeowners is evident, a bridge between policy and practice seems essential for Indonesia to truly open its doors. Only time will tell how this vast archipelago balances its local interests with the lure of foreign investment.

source: jakartaglobedotid