Foreigners still facing barriers to buying houses

Foreigners still facing barriers to buying houses

By Devi M. Asmarani

JAKARTA (JP): Two years have past since the government enacted
a regulation allowing foreigners to own properties in Indonesia,
but in practice this has not helped them purchase their own homes
in this country.

Developers, property consultants and home buyers all complain
about the poor implementation of Govt. Regulation No. 41/1996,
which states that a foreigner with a legal residency permit is
allowed to buy property here.

"The regulation has been unable to help save the property
sector from a crash and it is simply powerless to help foreigners
buy properties here," property analyst Panangian told The Jakarta
Post.

Panangian blamed a lack of action of the part of the
government for poor implementation of the regulation.

He said that information pertaining to the regulation had
never been disseminated to the public following its issue by the
Office of the State Minister of Land Affairs.

Poor understanding of the regulation lead to the central
government and local administrations interpreting it in different
ways, he said.

Even the State Minister of Land Affairs, Hasan Basri Durin,
recently admitted that a lack of awareness of the law had
impaired its efficacy.

Panangian said he expected the country to absorb at least Rp
14.9 trillion (US$1.86 billion) from the sale of property to
foreigners by this year, adding that the real figure had yet to
reach even 10 percent of that amount.

The regulation stipulates that a foreign national with
residency permits or who visits the country regularly or on a
seasonally basis for business reasons is allowed to own a
property -- a home, apartment or condominium unit -- provided it
is not in a subsidized housing scheme.

Panangian said problems surrounding land titles had prevented
property developers from tapping into the market potential opened
up by the regulation.

Under the law, foreigners can only buy property which has a
land-use rights certificate, however most property owners in
Indonesia hold building-use (the right to build) titles.

Potential buyers are often discouraged by the long and
complicated procedure required to convert a building-use title
into a land-use title -- a process that can take over six months.

An expatriate said that he has been trying with no avail to
buy a house in Indonesia for over two years now.

"I hired an attorney to make all the necessary arrangements
and I was told to wait for six months, but up to now, nothing has
materialized," he said.

Most apartment building owners hold building-use titles, not
land-use titles.

Since all apartment buildings are only covered by a land
title, the buyer of an apartment cannot have a land certificate
that is different from the one that has been issued for the
building. Consequently, foreigners cannot buy apartment units
built under building-use certificates, unless the land title is
converted to a land-use certificate.

Land-use titles last for 25 years and are extendible for a
further 20 years. The title can then be renewed for another 25
years.

Building-use titles are effective for 30 years, and can be
extended for another 20 years, after which they can be renewed
for another 30 years.

Holders of land-use titles can obtain the rights to their
property for 70 years without having to extend and renew their
certificates, while holders of building-use titles must apply for
extension and renewal of their certificates to get the full 80-
year rights.

Currently, most Indonesians prefer land-use right titles
because of poor awareness of the land-use title. Up until 1996,
land-use titles were only effective for a 10-year period.

Third party

Despite the possibility of owning properties in their own
right, it remains simpler for foreigners to purchase under the
name of an Indonesian national.

That is how most property transactions take place in Bali, the
country's number one tourist destination.

A property consultant in Bali said that although many
foreigners have purchased properties in the area, not one single
land-use certificate has been issued in a foreigner's name.

"Transactions that do take place have all been engineered by
developers. Foreigners must buy properties through a third party
who is a native Indonesian," he said.

Panangian called on the government to review the current
regulation and to monitor its implementation.

He said the government had not even addressed cases involving
the sale of properties to foreigners in Batam, Riau, which set "a
bad precedent" for the entire domestic property sector, he said.

In late 1980s, many Singaporeans bought properties on Batam,
an island reachable by a half-hour boat journey from Singapore,
before the regulation was drafted.

Properties were purchased through third parties and buyers
were promised that they would be able to convert the properties
into their own names in due course.

However, even after the 1996 regulation was enacted,
bureaucratic problems prevented this from ever taking place, he
said.

"This has badly damaged our image in the eyes of potential
buyers," he said.