Foreigners eligible for Land Title for up to 90 years
Foreigners eligible for Land Title for up to 90 years
Real estate demand and prices in Bali are about to increase
dramatically thanks to changes in the law governing land sales,
according to a real estate columnist for a Bali newspaper.
The columnist, Lawrence Bellefontaine, says that the changes
became apparent recently with the successful completion of a land
title for a foreign buyer of real estate in Bali.
Lawrence said the changes coincided with the news that one of
the regions major overseas banks was now prepared to lend money
to Indonesians, and probably eventually to foreigners for Bali
home and land purchases.
The source of information on the foreign title is one of
Bali's leading property legal firms. The firm says it has
completed transferring a Bali land title to a foreign national
without utilizing the nominee program, thereby eliminating
complicated documents and reliance on an Indonesian nominee.
A representative of the firm told Lawrence that foreigners were
now eligible for Hak Pakai Title, which provides for the right to
use the land from the government with a set term and renewal for
up to 90 years, providing the foreign buyer meets certain
requirements.
These requirements stipulate that the prospective foreign
buyer must be seen as a contributor to national development, i.e.
have economic interests in Indonesia through investments.
Ownership of houses or land is limited to one house erected on
one plot of land.
The land agreement provides for fixed terms for renewal of the
agreement within the 90-year period and the foreigner must apply
for these renewals a maximum of two years before the expiry date
of each of the terms.
Lawrence recommends payment three years ahead of time, to be
safe. There are unconfirmed reports, however, that it is possible
to prepay the extensions for 90 years. The foreigner must then
pay a small fee for renewal.
The steps to obtain a Hak Pakai are as follows:
* Set up a "Jual-Beli (Sales)" transaction with a notary.
* Pay a buyer tax -- 5 percent of the transaction value (which
is normal with any land sale in Indonesia).
* Pay a formal fee (government fee) of Rp 10,000,000 (for less
than 100 m2) and Rp 15,000,000 (more than 100 m2).
* Pay set-up fees of approximately 2 percent of purchase
price, including notary fee.
* The Hak Pakai certificate in the foreign buyer's name should
be issued within four to six months.
In laymen's terms this means foreigners can now have the right
to use the land without an Indonesian partner for up to 90 years.
At any time the foreign purchaser can convert back to a Hak
Milik and sell to an Indonesian at the current market price.
Therefore the new owner will be enjoying appreciation similar to
Hak Milik properties.
Lawrence estimates that 90 percent of potential Bali real
estate buyers have not bought property in the past because they
could not enjoy benefits similar to outright ownership. Now they
can.
Lawrence stresses that although his information is from a very
reliable source, anyone wishing to purchase property under this
title should seek out an attorney who is knowledgeable about this
law and who will review the terms and conditions of the Hak Pakai
(Right of Use) land title with them.
Lawrence says that a recent change in the lending policies of
a major international bank is also enormously encouraging to the
average buyer.
Using other people's money is the most exciting and most
profitable way of buying real estate. The bank's new approach
will come as heaven-sent news to Bali real estate investors who
have already been earning extremely handsome returns through full
cash purchases.
He says that the bank in question has already begun lending
money to purchase properties in Jakarta and is now starting to
lend money in Bali.
The interest rates are substantially higher than in most
countries primarily because the bank faces substantially more
risk, especially since the loans are made and repaid in rupiah.
The bank hopes to have euro and US dollar loans "in the near
future".
The loans offered by the bank include;
* Housing loans (first mortgage with installment payment scheme
and home refinancing (second mortgage).
* Home refinancing (second mortgage with
installment/revolving/overdraft)
* Currency: Rupiah
* Maximum loan amount: Rp 2 billion
Loan amounts up to 80 percent of the house value, 70 percent of
apartment and 70 percent for house-shop-office.
* Terms include: House 1 - 20 years, Apartment 1 - 10 years,
House-Shop-Office 1 - 10 years.
Lawrence plugged the high interest rates and terms of the
loans into a cash flow scenario model for a typical three bedroom
luxury freehold beachfront villa complex in Bali that he has just
started developing.
He took as an example a borrower seeking to purchase a large
beachfront luxurious villa worth $421,000. Now he or she would
only have to invest $221,000 instead of $421,000. The balance
would be financed by the bank for 15 years.
If the villa appreciated at an average of 8 percent per annum
(a conservative figure at present), after deducting all expenses
the owner would walk away with an average net return of 37.8
percent per year while enjoying the villa for 50 percent of the
time.
Lawrence says that when foreigners realize that they can
purchase Bali properties for as much as 70 percent less than
similar properties in their own countries and now do not need a
nominee with bank financing, the sky is the limit on demand and
prices.
He will be lecturing on these developments and on the Balinese
real estate market at a series of seminars in Asia and Australia
over the next few months.
One of the free seminars will be held at the Jogjakarta Hyatt
Hotel, Yogyakarta, on Sept. 23 from 6:30 p.m. to 7:30 p.m., and
on Sept. 24 from 10 a.m. to 11 a.m. -- PT BALI real estate agent