Some expatriates buy houses in Indonesia to spend their holidays there, while others purchase them for retirement and investment purposes. No matter what purpose is, with more than 80,000 expatriates living in Indonesia, it’s easy to see why the prospects for the property market look bright.
But how bright that prospect could be is still open to question, as developers feel government’s restrictions on foreign ownership has made Indonesia appear less attractive to expatriate buyers.

“Expatriates are only allowed to hold a leasehold title for 25 years. Although they can renew the title for another 25 and 20 years, it’s actually complicated for them,” said Teguh Satria, chairman of the Indonesian Real Estate Association (REI). “Why do we not just give them the right for 70 years from the beginning, to make it easier?”

Teguh acknowledged that the 1960 Basic Agrarian Law allowed foreigners to use land for no longer than 70 years, thus scrapping the “25-25-20” scheme would be the best possible option for the moment.

“In terms of pricing, properties in Indonesia are much more affordable than neighboring countries,” he said. “However, it’s the 25-year [renewable] term that makes Indonesia lag far behind.”
Compared to Indonesia, for example, he said, properties in Singapore are 11 times more expensive. The price of property in Macau, on the other hand is four to six times higher, and in Malaysia, two to three times more expensive.

However, “Singapore offers 99 years of ownership; Malaysia 90 years, and in a certain area in Johor, they even let foreigners have a freehold title,” Teguh revealed. “Not only that, other neighboring countries already have their own programs designed to attract expats.”
Malaysia, for example, has “My Second Home Program”, while Thailand promotes its “Long Stay Program”. The Philippines, on the other hand, is introducing a “Retirement Program” for Japanese and Korean expats, granting them a lifetime visa.
“With these kinds of programs, expats will feel more secure, knowing that at least they have been granted legal security,” Teguh said.

Currently, the REI is discussing with the government a plan to revise the 1996 regulation on foreign ownership. Besides asking for the 70-year term, the REI is recommending the government gives expats legal security in terms of inheritance rights.

“We want the government to specifically regulate on this matter, giving assurance to foreigners that their family will be able to inherit their property when they die,” Teguh said, adding that the current regulation allows the government to take away the property if a foreigner dies.
According to Teguh, foreign ownership should not be seen as “selling the country”, but as bringing advantages to Indonesia. With around 10,000 apartments sold each year at US$ 250,000, he said, the market represents US$2.5 billion in direct investment. From this amount, 20 percent will be channeled to the government coffers in taxes.

“So we estimate the country could receive around Rp 5 trillion in taxes per year,” Teguh said. “Imagine if this Rp 5 trillion was used to build rusunami apartments for the lower-middle class,” he added.
There would be other multiplier expects, with expats spending money in Indonesia and hiring local employees. “This would give impetus to local industries, and contribute to the country’s whole economy,” Teguh said.

Residential expert Nonny Subeno said concurred with Teguh on the issue of foreign ownership.
“The government, as far as I am concerned, is worried locals will be pushed out of the apartment market, because foreigners will own most of them,” said Nonny of Provis Advisory Indonesia. “But there shouldn’t be any problem. We could follow the Thai model, where foreigners can only own up to 40 percent of the total number of apartments.
“In our case, maybe we can make it 30 percent for expats, and 70 percent for locals. That would be fair,” she added.

— JP/ Dian Kuswandini

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