What you need to know when purchasing an apartment

Lynnette Johnson, and Ipung Rachmaningtyas Contributor Jakarta

When considering the purchase of an apartment unit in Jakarta, whether as your home or as an investment rental property there is no doubt that you will have to examine more than one egg before putting it in your basket. Prior to committing to purchasing an apartment, here are the answers to some questions you should consider.

- Can a foreigner own an apartment in Indonesia? If you are a foreigner then you would be well advised to seek a legal representative due to ambiguity in Indonesian Property Law. A foreigner can only obtain a Right of Use Certificate (Sertifikat Hak Pakai) which is generally valid for 25 years and extendable for another 25 years. This type of land title is often complicated to obtain as the developers usually register the apartment complex on a Right-to-build (Hak Guna Bangunan) land title certificate.

So how can a foreigner solve the problem? There are some ways for foreigners to buy property in Indonesia including signing a Convertible Lease Agreement with the apartment property management office to purchase an apartment, using an Indonesian citizen as a nominee or using a PMA (foreign investment) company. Whichever, the assistance of a legal advisor could save you time and money.

-How much are you willing to pay?

Before you go further, you need determine your budget as pricing can significantly vary even between similar units located in a single tower due to an array of factors such as which level the apartment is located on, quality of fixtures and fittings as well as overall layout and the type furniture, if any. The price of a unit offered for sale by the developers often varies from the prices offered by private owners. You might be surprised to find a relatively affordable apartment in the CBD due to the owner's current financial situation or confused when you find that the same apartment next door is being offered at an unrealistically inflated price. If you buy an apartment from a private owner, you split the payable tax which is 10 percent of the Taxable Property Price (NJOP) 50-50 with the owner and no additional luxury taxes will apply as opposed to purchasing through a developer in which case it is the buyer who is responsible for paying these taxes.

- What are my expectations if I want to lease out my apartment? If you would like to lease out the apartment, you should also consider your return on equity which will determine the minimum rent you wish to receive. Perhaps, a 10 percent-12 percent rate of return is quite feasible. For instance, typical unfurnished 3 bedroom units in Pavilion Park have a sale price of around Rp 1.2 billion or US$135,000 and can be leased out at around US$1,500 per month. If you want to purchase a typical unfurnished 3 bedroom unit in The Dharmawangsa due to their high demand, you may have a low return of between four percent and six percent. Such units leased for US$4,000-6,000 per unit per month are offered for sale at around US$1.2 million per unit. The choice is yours.

-What if I want to live in the apartment? When selecting an apartment as your private home as well as taking your budget into consideration, you should be specific with your personal preferences, choosing a property that meets your needs and lifestyle.

-The CBD or outside the CBD? Now, do you prefer to view city skyscrapers or green hills from your window? Do you want to stay away from the city yet close to amenities such as shopping areas, schools and toll roads? Or do you want to be only a short commute to your office? Where is the nearest hospital to your apartment? Do you want to be located close to expatriate communities like in the Pondok Indah, Kemang or Menteng areas? To conclude, you should be aware of your preferred location. These questions will help you to shortlist the apartments to consider prior to making site visits.

- How about facilities within the apartment complex? The must-have facilities can be subjective to different people. However, the more facilities you have, ideally the better. You should also ensure the facilities are adequate to cater to all residents when occupancy is high otherwise it would be too crowded. Some of the facilities you should consider are:

- Drugstore and/or mini market - Dry cleaning/laundry room - Fitness center or health club - Jacuzzi - Jogging track - Playground - Swimming pool - Tennis court and/or squash - Beauty salon

- How about the ambience of the apartment? Check on the physical occupancy of an apartment, you might not like it if it is too crowded. In addition, the quality of building and standard of maintenance should be ensured in determining your impression. Now you can weigh the advantages and disadvantages of each apartment based on the aforementioned aspects. (The writers work as tenant/buyer representatives of Koll IPAC property consulting firm).