The property sector applauded the government’s announcement on Wednesday that it intended to allow foreign nationals to take out property leases of up to 95 years, instead of the current 25-year maximum, but noted that key details of the plan had yet to be released.
“It’s good news for the property industry but we need more explanation about the details of the scheme,” said Bayu Utomo, director of business development at property consultancy PT Procon Indah.
Bayu said on Thursday that there were several details that required more explanation, including the minimum price of properties that could be bought by foreigners, what percentage of housing developments they could buy and whether the scheme applied to standalone houses or just apartments.
Most importantly, he said, was whether any foreign national would be eligible under the new rules, or whether they required an Indonesian work permit to be eligible.
If it applied only to those with work permits then it would have limited impact on the property sector because of the small number of expatriates in Indonesia, he said.
In January, the Indonesian Real Estate Developers Association (REI) predicted that the plan to open up the property sector to foreign buyers would likely more than triple the sector’s contribution to the gross domestic product to 10 percent. Last year, the property sector accounted for 2.7 percent of GDP.
REI chairman Teguh Satria said the association was in discussions with the Housing Ministry on the details of the changes.
“On the minimum price per property, we’re suggesting that it should be above $100,000 to ensure that less well-off Indonesians are not squeezed out of the market,” he said.
Teguh also suggested that foreign nationals be limited to owning a combined 49 percent of any single development.
“As for which foreigners could own properties, we prefer the government open it to everyone, not just ones who have working permits,” he said.
Hiramsyah Thaib, president director of property developer PT Bakrieland Development, said that if the government followed the association’s recommendations, the changes would generate around $3 billion a year of investment in the property market.
On Wednesday, Housing Minister Suharso Monoarfa said the government had already finalized the draft of its revision of the 1992 Housing Law and that one of the main changes was that foreign nationals would be allowed to lease properties for up to 95 years.
“The draft’s revision has been finalized and submitted to the House of Representatives,” Suharso said. “I hope it will be approved by May.”
The government would also change a 1996 regulation limiting the amount of time foreigners were able to lease a property, he said.