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.