Foreign home ownerships laws relaxed in Indonesia
Indonesian developers have spoken about the optimism for the country’s property market after the government announced that laws concerning foreign investors buying high-end apartments would be relaxed; currently, foreigners can only claim a property in the country for a maximum of 25 years. Eddy Hussy, chairman of the Indonesian Real Estate Developers Association (REI), listed increased levels of tourism, higher taxes and decreased unemployment levels as benefits resulting from rising foreign investment. 
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Linkedin Aulia R. Sungkar (The Jakarta Post) ● Sat, September 12, 2015

As Indonesia's property market welcomed the government's plan to allow foreigners to own high-end apartments in the country, developers nationwide are looking forward to its immediate effect.



Representing the voice of national developers, the Indonesian Real Estate Developers Association (REI) expresses its support for the planned luxury apartment regulation, as the association believes foreign ownership of property will create a multiplier effect that can contribute to the wheel of the economy.



The Jakarta Post's Aulia R. Sungkar recently talked with Eddy Hussy, REI chairman about the issue. The following are the excerpts of the interview.



Question: Property ownership by foreigners has become a central talking point in Indonesia's property industry. What is your view on this?



Answer: Foreign ownership of property is actually not a hot issue, as it is discussed in government regulations no. 40 and 41. Regulation no. 40 centers on the rights of foreigners with regard to property ownership, including the right to hold a leasehold title and the length of a lease, while regulation no. 41 gives foreigners the right to purchase an apartment as long as it is on land with clear legitimate status.



It's just recently become a central talking point after the government announced its plan to favor foreign ownership of property. To implement the plan, however, the government needs to revise regulation no. 41. Currently, foreigners can only purchase properties with leasehold title, not freehold, for a maximum period of 25 years (renewable for an additional 20 years and 25 years, respectively, totaling 70 years). The new regulation should be more flexible with an open-ended duration and the right to be inherited by heirs. If the plan is realized, this will not only give hope to developers and investors but also benefit the whole nation, as it will support Indonesia's economic growth.



How lucrative is the foreign ownership of property?



There are 174 industries that relate to the property sector, from construction and design to tourism and hospitality. That's a lot of industries. Property ownership by foreigners is undoubtedly a big investment that will boost these industries, which in turn will lead to the needs of hiring more staff, thus helping to improve the country's employment rate. No less important, this will pave the way for the government to collect higher taxes, from employees to land and building tax, to name a few.



One great benefit that people often overlook is the benefit gained in tourism. Foreigners who own property in a particular country have the tendency to visit the country frequently for various reasons. Perhaps they only come just to monitor the maintenance of their properties. More often than not, they come with their families for vacation.



Singapore and Australia are good examples. These two countries have become property investment destinations for many foreigners. Correspondingly, the foreign property investors have also become permanent tourists, as they regularly spend their time and money there. Can you imagine how much Indonesia could benefit by allowing foreigners to purchase property here? The land in Singapore is very small. It's really nothing compared to our land. Many places in Indonesia beckon as lucrative property investment. We really think that the government should go ahead and realize the plan. With clear legal matters, foreign ownership of property will undoubtedly add value to our economy. The government can generate a higher foreign exchange income because there will be more foreign money coming into the country.



Can Indonesia's property industry compete with that in its neighboring countries, especially with the upcoming implementation of the ASEAN Economic Community (AEC)?



Regulations among the ASEAN member countries will be more transparent. Foreigners from ASEAN countries working in Indonesia or vice versa will open more economic opportunities. This includes the feasibility of foreigners to purchase property in Indonesia. The AEC should also serve as an opportunity for Indonesia to catch up with our neighboring countries, like Singapore and Malaysia, which are already ahead of us when it comes to property investment by foreigners. Almost all countries worldwide allow foreigners to buy property to support the era of globalization. It's only months before the start of the AEC, which will provide a greater opportunity for Indonesia, being Southeast Asia's largest economy, to promote the archipelago to the world.



Do you think this plan on property ownership by foreigners will take effect soon?



I can't tell, but I really hope it will. This is the issue that REI as the umbrella of developers has long been struggling with. With the upcoming AEC and new government, we really have high hopes on this. The plan is feasible, though. The government should think of the taxes generated from it, too.



Will the regulation disrupt the property market, especially middle-segment demand?



Of course not, so long as the government sets a minimum price for foreign ownership. Ministerial Regulation no. 7 on the requirements of home ownership by foreigners also sheds light on the fact that apartments that can be owned by foreigners are not those in the category of 'simple house' or 'very simple houses'. The plan is to allow foreigners to purchase only expensive apartments priced at least Rp 5 billion (US$380,000). Looking at the size of the country and its varied attractive places to build luxury apartments, I'm sure the income tax generated from this investment will be significant. I sometimes don't understand those who are worried about this foreign ownership issue. The properties stay here in the country and they can't take these assets with them anyway. Why worry?