Foreigners residing in Indonesia may by and large benefit from changes to the housing policy if the government’s plans to tweak Regulation No 41/1996 materializes, currently it disallows complete foreign ownership of Indonesian property.
Under Indonesia’s current Land Law, there is a “right-to-use” category which applies to foreigners who are keen to obtain a property. However, it restricts foreign buyers to use the property over a period of 25 years and further subjecting it to an extension of 20 years thereafter.
With the proposed policy revision, it will allow foreigners to buy, own, inherit and trade apartments with a minimum property value of IDR 5 billion, exercised under the ‘right-to-use’ category. Another notable consideration is to do away with time limitations on the property obtained, enhancing option flexibility for the property to be bequeathed to their descendants or to release it in the resale market.
Indonesia understands the need for foreign ownership flexibility as it looks to compete with regional counterpart like Singapore, Malaysia, Thailand, Australia and the Philippines. There is a clear indicator of Indonesia’s desire to improve its competitive edge in the regional market. In comparison, Malaysia has a price threshold between RM 1 mil to RM 2 mil for foreign ownership, different states have its own policy rules with this boundary. Foreigners in Singapore just need to acquire its government’s approval for the purchase of restricted property while in Thailand, a typical condominium project must not allow more than 49 per cent of the total unit floor area be foreign owned.
In the Southeast Asian region, property ownership remains highly affordable as its prices are among the cheapest. Forecast for property demand remains strong and robust, given Indonesia’s abundance of land, educated population and rapid urbanisation.