T

he Indonesian Real Estate Developers'€™ Association (REI) recently released a statement saying that there was no substantial difference between Government Regulation (PP) No. 103 Year 2015 and Government Regulation Number 41 Year 1996 on the Foreign Ownership of Residential Places in Indonesia. REI has proposed seven points of interest in regard to this issue.

 Ignesz Kemalawarta, the deputy chair of the central board of REI, said the government should think about accommodating the seven proposed points from REI so that the new regulation could help the property sector to grow.

 '€œUnless the government clarifies the new regulation, it may end up just like the previous one; it won'€™t be effective,'€ Ignesz said, as quoted by Kompas.com.

 Ignesz explained the first point in the proposal was that the Right to Use (HP) should be recognized by the banking sector so that it could be used as a mortgage, collateral, or the equivalent of the Right of Building (HGB).

 Ignesz argued that in order to reinforce the status of Right to Use, the Financial Services Authority should allow it to be used as collateral.

The second proposal is that if possible, foreigners should be able to extend their period of ownership in advance, which is necessary to guarantee certainty.

Third, foreigners can obtain residence permits after they conduct the property transaction. '€œOf course, this needs to be regulated by the Law and Human Rights Ministry,'€ Ignesz added. This, in turn, requires a decree from the minister to simplify the process of obtaining residence permits, including after transactions for property ownership.

The fourth proposal concerns the minimum price of the properties, which is Rp 3 billion for a landed house and Rp 5 billion for an apartment. This should be reinforced by a decree from the finance minister to discourage the purchase of middle to lower-level property by foreigners. Furthermore, any regulation that governs pricing should take into account purchasing power and the price levels in different regions. '€œEach region has its own price level. There is also the automated increment factor as price is a fluid factor,'€ Ignesz said.

The fifth proposal concerns the number of properties available to foreigners.

The sixth proposal concerns landed houses purchased by foreigners and the Right to Use status.

Finally, because the regulation is new, the government should come up with a way to effectively disseminate the similarities between the Right to Use, the Right of Building and the Right to Own.

Meanwhile, Ishak Chandra, the CEO of strategic development and services at Sinar Mas Land, welcomed the government'€™s plan to lower the price limit for foreign property ownership to under Rp 10 billion and to let non-resident foreigners own a property in the country. This means the regulation will be similar to the regulations applied in Malaysia and Singapore.

As reported in Bisnis.com, Ishak said the ideal price bracket for foreigners to own a piece of property in Indonesia was between IDR 3 billion and IDR 5 billion, either for a landed house or for a vertical residence. By comparison, Malaysia sets the price limit for non-Malaysians at RM 1 million or around Rp 3.2 billion.

In relation to the differences in purchasing power in the local and foreign markets, the Rp 3 billion price limit may seem quite low for foreigners. That is why there should be a regulation that limits the number of residences foreigners can purchase, Ishak argued.

'€œWe have to be realistic. We should set a limit for the number of purchases. If not, foreigners will buy all of the nicer spots. They may use these as a means of investment,'€ cautioned Ishak during an event that introduced Nuvasa Bay in Batam last Saturday.

Furthermore, foreign buyers need a guarantee that their property can be used as collateral, not just as a residence or a means of investment for leasing.