Government won't fully open local property market

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)