T

he government is close to finalizing a regulation that would allow foreigners to own apartments after President Joko '€œJokowi'€ Widodo approved the proposal, top government officials have said.

The President has agreed in principle to the idea of allowing foreigners to own Indonesian residential assets to boost the attractiveness of the local property sector, Teten Masduki, a member of the President'€™s communications team, said in a recent statement.

Coordinating Economic Minister Sofyan Djalil confirmed on Wednesday that the new regulation would be issued after it had been finalized in the upcoming two or three Cabinet meetings.

Sofyan insisted that the regulation, which would allow foreigners to own a flat with a value of more than Rp 5 billion (US$375,000), would not trigger a price bubble in the property sector, as it was specifically targeted at, and limited to, the luxury-apartment market.

'€œThe regulation will be identical to the existing one allowing foreign companies to lease [commercial] space up to 30 years. However, the new one covers not only foreign companies, but foreign individuals,'€ Tourism Minister Arief Yahya explained on Wednesday.

'€œThe new proposal will be good for investment and capital flow into Indonesia, as well as our tourism industry,'€ he said.

The Indonesian government currently bans foreigners from purchasing property in Indonesia, although many do so through their Indonesian spouses or other citizens.

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.

InvestmentCoordinating Board (BKPM) chairman Franky Sibarani said that he had suggested the ownership period be extended to a 50-year period, with an option of two 15-year extensions.

Foreign ownership of apartments, he suggested, could be loosened in special economic zones (KEK) to attract more expatriates to boost the local economy there.

'€œMany foreigners in fact own property assets in regions by using other [local] persons. We must acknowledge that such a loophole exists,'€ he argued. According to developers, the property sector has seen sluggish demand in the past year on the back of a slowing economy, which decelerated to 4.7 percent in the first quarter this year, the slowest level in five years.

To revive economic growth and resuscitate the property sector, Bank Indonesia (BI) on Wednesday relaxed its loan-to-value (LTV) ratio, with local consumers now allowed to buy houses with smaller deposits.

The loosening of foreign ownership of property assets would apply only to high-rise apartments, not landed houses, and there might be different regulations for Indonesian and foreign property owners, said Syarif Burhanuddin, the Public Works and Public Housing Ministry'€™s director general of housing.

'€œWe welcome the opening up [of the property market] to foreigners. The potential impact is huge: developers will benefit and our economy will grow,'€ Syarif said.