JAKARTA (TheInsiderStories) - The Indonesian government will allow foreigners to buy luxury apartments with price threshold of at least Rp 10 billion ($699,301). The move is part of wider government efforts to revive the economic growth, including property sector.
The statement issued by Coordinating Ministry for Economic Affairs office didn’t specify whether foreigners would need to be Indonesian residents to buy apartments and when the rule will come into effect.
Previously, foreigners are only able to own luxurious apartment and landed houses by using the “rights to use” certificate, not “right to own” (SHM certificate), in Indonesia even though they are allowed to do so by using the name of a local resident. Foreigners are allowed to purchase strata title-type properties, which include “right to use” buildings only — excluding land — through a building ownership certificate for a 25-year period with the opportunity to extend.
Coordinating Minister for the Economy Darmin Nasution outlined that the new regulation is aiming at boosting foreign investment in property business in the country. He stated that the regulation needs revision of presidential decree.
The Indonesian Real Estate Developers Association (REI) welcomed the planned new ruling as property developers have been struggling to boost demand amid the growing need to support the economy. Real-estate developers have been hurt by the economic slowdown, with the property gauge losing 14 percent this year as the main index declined by 17 per cent.
Developers are convinced the regulation will not disrupt overall property market prices and middle-segment demand as the government plans to set a minimum price for foreign ownership.
“Foreign ownership of property will create a multiplier effect and add value to the economy, because we will see more foreign money coming into the country,” REI chairman Eddy Hussy said.
In a related tax development, the government recently lowered its “luxurious apartment” cutoff to anything more than Rp 5 billion from the former Rp 10 billion, requiring buyers to pay a 5 percent luxury tax that is deductible from their annual income tax.
The central bank’s so-called loan-to-value (LTV) regulation may also be relaxed to spur demand for loans and for property in a bid to propel the economy.
Vivin Harsanto, head of advising at Jones Lang Lasalle (JLL), said this year the domestic property market would improve, including condominiums in Greater Jakarta, as reflected in high enthusiasm from foreign investors and rising prices.
According to JLL data, condominium supply for the 2015-2018 period is estimated to reach 57,000 units, or equal to 60 percent of the existing supply of 93,639 units. The new supply will have a take-up rate of 97.5 percent, with sales likely to reach 80 percent. (*)
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