Expatriates in Indonesia may soon be able to make the jump from being renters to owners, as the State Ministry of Public Housing announced on Thursday that it was planning changes to the law that would allow foreigners to own homes in cities and special economic zones.
Housing Minister Suharso Monoarfa said expats would be able to buy houses in special economic zones, such as in Batam and Kalimantan, where overseas companies receive incentives to run factories. Foreigners living in cities would be limited to owning apartments.
“I am not trying to indulge [expats],” he insisted at a seminar in Jakarta. Under the current law on foreign property ownership, expats are only allowed to hold fixed-term housing leases of up to 25 years, although they are permitted one extension for another 25 years.
The proposed change in government policy comes after numerous calls from property developers to ease restrictions on foreign property ownership, which has led to expats exploiting a wide variety of legal loopholes to indirectly own houses and apartments.
For example, an expat can give a local resident money to buy a home, with the parties signing an agreement beforehand that the resident would receive a loan from the foreigner worth the same amount as the home.
While the property is in the local’s name, it is signed over to the expat as collateral for the loan, making the foreigner the de facto owner.
“We have been asking the government to extend foreigners the right to hold leases to apartments and houses for a minimum of 75 years. But if it they be allowed to purchase property outright, that will be definitely good,” Teguh Satria, chairman of the Indonesian Real Estate Developers Association (REI), said on Thursday.
He added that relaxing foreign ownership regulations would make the Indonesian property market more competitive, compared to neighboring Malaysia and Thailand.
“Malaysia has already changed its property regulations. Previously, foreigners were only permitted to own two properties but now they are able to purchase more. They are even allowed to buy 49 percent of the apartment units in one building,” Teguh added.