Government won't fully open local property market

JAKARTA (JP): State Minister of Public Housing Akbar Tandjung rejected demands from housing developers yesterday to fully open the local property market to foreigners, which they argue would bolster today's sagging market.

Akbar told a seminar on property law that the government's chief concern is still in providing affordable housing for Indonesian people.

He said Indonesian regulations encourage foreign investors to develop houses and build apartments, but not to own them.

Speaking at a seminar to review Indonesian property law with regards to foreign ownership, Akbar said he disagreed with the argument that allowing foreigners unlimited access to Indonesian property would stimulate the housing market.

"Based on my own observations, the demand for low-cost housing is still far in excess of what the developers can supply," he told the seminar organized by Tistra Communication at the Grand Hyatt. "If there are marketing problems, it is largely occurring in the market for luxury property, particularly apartments."

The one-day seminar was held amidst fears that the completion of hundreds of new luxury apartments would glut the local property market, particularly in Jakarta.

The leading property consultant, PT Procon Indah/Jones Lang Wootton, said in a report last week however that its own survey found the demand for apartments, including condominiums, in Jakarta to be stable.

Akbar said the current regulation by the State Investment Coordinating Agency permits foreign investors to undertake housing development projects.

The List of Investment Opportunities states that foreign investors can take part in the development of non-apartment housing for the low, medium and upper segments of the market.

However, the list makes no mention of the construction of apartments, he noted. "But, in my opinion, the construction of apartments should also be open to foreign investors, because it is now time to introduce the concept of living in high rise buildings to improve efficiency in land use and in property investment as well as in public facility maintenance."

Akbar said Indonesian investors could only supply about a fifth of the demand for new housing in large cities, which reach 610,000 units each year.

Nationwide, Indonesia needs to build one million housing units each year simply to keep up with the growing population and make up for the shortages that have been accumulating over the years.

Akbar said the law allows for restricted ownership of Indonesian property by foreign investors through corporations, rather than individuals.

The 1960 Agrarian Law and the 1985 law on apartments allow foreigners residing in Indonesia to own apartments for their own use, which must be built on land with a leasehold title.

The regulation, however, requires further clarification because there is still debate over whether the leasehold should be limited to 10 years or longer, he said.

Akbar said there are some Indonesian experts and government agencies disagree as to whether or not foreigners should be allowed to own non-apartment property, with many arguing against the idea.

"I think the question of foreigners owning Indonesian property other than apartments should be thoroughly discussed and studied, taking into account the cost and benefit to the nation and the state," he said.

Several housing executives and their lawyers have said that uncertainties in Indonesia's property law have deterred many potential foreigners from investing in Indonesian property.

As a result, lawyer Otto Cornelis Kaligis, one of the speakers at the seminar, said foreign investors have gone to other countries where the law is clearer, such as Malaysia and even China. "Some are daring to enter Indonesia at the risk of breaking the law."

Yopie S. Batubara, the deputy chairman of Indonesian Real Estate, argued that Indonesia should change its law and allow foreigners to buy land.

He recalled that Japanese and Canadian investors pulled out of their plan to invest in Nias Island off the western coast of Sumatra due to uncertainties in the property law. (03)