Property analysts expect the condominium market to benefit this year from a revision to government regulations that will allow an extension of foreign ownership from 25 years to 70 years.
The expectation follows a statement from Public Housing Minister Suharso Monoarfa earlier last month, promising the revision should be completed in May.
Suharso said the 1996 government regulation on foreign ownership of property was made in the past when Indonesia did not adhere to an open economic system. Now, with the advent of the free trade era, the regulation had become obsolete or useless, he said.
The new regulation will only apply to condominiums in big cities such as Jakarta or special economic zones such as Batam Island.
Bayu Utomo, business development director at PT Procon International, a property consultant, said Tuesday the revision to the regulation would greatly boost Indonesia’s condominium market as it already highly competitive in terms of price.
“Apart from the new regulation, being more friendly, foreigners are attracted to the price of property in Indonesia, which is relatively cheaper than Singapore or Malaysia,” he said.
Condominiums are currently priced at between Rp 10 million (US$1,070) and Rp 25 million per square meter in Indonesia, substantially lower than Singapore and Malaysia.
“The government will raise more capital from taxes and foreign exchange, as a consequence this will drive significant growth in the property sector and the Indonesian economy, because they [foreigners] will also spend their money on Indonesia’s markets.” Bayu said.
Djodi Trisusanto from Jones Lang LaSalle, another property consultancy firm, said the regulatory review should also be applicable in tourism destinations such as Bali and Lombok, where there is currently a mushrooming in illegal brokering schemes to transfer property rights to foreigners.
“In Bali we can see 60 percent of tourism places are owned by foreigners who have brought then through nominees. We have to avoid this bad because it means losses for the country,” Djodi said.
Jones Lang LaSalle estimated that there about 83,000 foreigners living and working in Indonesia.
“If just one percent of them buy properties, meaning 800 foreigners times Rp 1.5 billion, it’s quite a lot of revenue for Indonesia,” Jones Lang LaSalle Indonesia chairman Lucy Rumantir said.
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