I

ndonesia'€™s property market, especially the premium high-rise category, will be lifted out of recent sluggish demand if the government goes ahead with its plan to allow foreign ownership of luxury apartments.

The government last week unveiled a plan to allow foreigners to own luxurious apartments in the country, where foreign ownership is currently banned for all properties except the '€œstrata title'€ types of apartments and condominiums.

Finance Minister Bambang Brodjonegoro said the policy would be '€œgood for supporting the property sector'€, expecting it to help boost Southeast Asia'€™s largest economy as growth continued shrinking to levels unseen since six years ago.

The Indonesian Real Estate Developers Association (REI) welcomed the planned luxury apartment regulation as property developers have been struggling to boost demand amid the growing need to support the economy.

Developers are convinced the regulation will not disrupt overall property market prices and middle-segment demand as the government plans to set a minimum price for foreign ownership, REI chairman Eddy Hussy said.

'€œForeign ownership of property will create a multiplier effect and add value to the economy, because we will see more foreign money coming into the country,'€ he told The Jakarta Post on Sunday.

The government only intends to allow foreigners to own expensive apartments, for which it plans to set a minimum price.

In a related tax development, the government recently lowered its '€œluxurious apartment'€ cutoff to anything more than Rp 5 billion (US$382,000) from the former Rp 10 billion, requiring buyers to pay a 5 percent luxury tax that is deductible from their annual income tax.

The Indonesian government currently bans foreigners from purchasing property in Indonesia, even though they are allowed to do so by using the name of a local resident.

Foreigners are allowed to purchase strata title-type properties, which include '€œright to use'€ buildings only '€” excluding land '€” through a building ownership certificate (SKBG) for a 25-year period with the opportunity to extend.

Kiswoyo Adi Joe, an analyst from Investa Saran Mandiri, said the future policy would help boost the domestic property market.

'€œCurrent [property] regulations for foreigners are still complicated,'€ he said, comparing Indonesia to Singapore.

The property sector has seen sluggish demand in the past year against the backdrop of a domestic economic slowdown and tighter mortgage down payment regulations from the central bank, developers have said.

The central bank'€™s so-called loan-to-value (LTV) regulation may also be relaxed to spur demand for loans and for property in a bid to propel the economy.

The regulation was issued in 2012 to curb excessive mortgage and automotive loan growth and to ease property speculation.

Vivin Harsanto, head of advising at Jones Lang Lasalle (JLL), said this year the domestic property market would improve, including condominiums in Greater Jakarta, as reflected in high enthusiasm from foreign investors and rising prices.

According to JLL data, condominium supply for the 2015-2018 period is estimated to reach 57,000 units, or equal to 60 percent of the existing supply of 93,639 units. The new supply will have a take-up rate of 97.5 percent, with sales likely to reach 80 percent.