A Guide for For­eign­ers Buy­ing Prop­erty in In­done­sia

Indonesia Expat - - TRAVEL TIPS - BY MART POLMAN1 AND WINDRI MARIETA2

Prop­erty in­vest­ment is one of the pre­ferred in­vest­ment op­por­tu­ni­ties for In­done­sians, but prop­erty sales to for­eign­ers – es­pe­cially for in­vest­ment – is far less com­mon. This ar­ti­cle will guide you on what you should be aware of prior to buy­ing a prop­erty in In­done­sia.

Over the last ten years, In­done­sia's GDP grew an av­er­age 7.31 per­cent YoY. Each year, eight to nine mil­lion peo­ple en­ter the mid­dle class. This new mid­dle class fu­els the de­mand for prop­er­ties in the mid­dle seg­ment. This drives up the prices since over­all there’s a short­age of af­ford­able prop­er­ties, es­pe­cially in the Greater Jakarta area. This of­fers a great in­vest­ment op­por­tu­nity.

Rea­sons to buy prop­erty

Of­ten buy­ing prop­erty is as­so­ci­ated with find­ing a place of res­i­dence, whereas prop­erty in In­done­sia can of­fer an in­ter­est­ing in­vest­ment op­por­tu­nity with a rel­a­tively low en­try level cap­i­tal re­quire­ment com­pared to de­vel­oped mar­kets. A prop­erty in­vest­ment would gen­er­ally start at Rp1 bil­lion, or around US$ 67,000.

So how much cap­i­tal gain and rental yield can be re­alised from in­vest­ment in prop­erty in In­done­sia? Of course the gains and yields vary per prop­erty and per re­gion, and for ex­am­ple de­pend on how strate­gic the lo­ca­tion of the prop­erty is and if there are ma­jor in­fra­struc­ture de­vel­op­ments in the area.

Ac­cord­ing to data taken from La­mudi.co.id search engine, the top three ar­eas for for­eign­ers to buy prop­erty in In­done­sia:

1. Bali

2. South Jakarta

3. Batam Th­ese are gen­er­ally also ar­eas where many for­eign­ers re­side so it makes sense that th­ese are top of mind for for­eign­ers think­ing to in­vest in prop­erty, but th­ese may not al­ways be the best ar­eas to in­vest when look­ing for pure cap­i­tal gain po­ten­tial.

The largest cap­i­tal gains are made in so called “sun­rise” cities, cities that are be­ing de­vel­oped. In th­ese cities, ma­jor in­fra­struc­ture projects are un­der­way such as the LRT/MRT and new toll roads. Th­ese de­vel­op­ments can de­crease the travel time from th­ese ar­eas to Jakarta by half or even more, which will greatly im­pact the prop­erty prices in th­ese ar­eas.

La­mudi.co.id prop­erty data gives us an ac­cu­rate in­di­ca­tion of the cap­i­tal gains that have been re­alised over the last three years in th­ese ar­eas:

1. Tangerang: 4%

2. Bekasi: 7.68%

3. De­pok: 4% Once you de­cided you’re in­ter­ested to in­vest in prop­erty there are cer­tain things to en­sure:

1. En­sure you have a valid stay per­mit

Such as diplo­matic stay per­mit ( izin ting­gal diplo­matik), ser­vice stay per­mit ( izin ting­gal di­nas), on-visi­ta­tion stay per­mit ( izin ting­gal kun­jun­gan), lim­ited stay per­mit ( izin ting­gal ter­batas), or per­ma­nent stay per­mit ( izin ting­gal tetap).

2. Un­der­stand the cer­tifi­cate types

Un­der In­done­sian law, right to use ( hak pakai) is used as the right of a for­eigner to pur­chase a prop­erty. The prop­erty it­self can be a sin­gle house built upon right to use or right to use above a land with “right to own” ( hak mi­lik), or right to use above a land with right to build ( hak guna ban­gu­nan).

A for­eigner can ob­tain an apart­ment which is built upon the right to use.

3. Un­der­stand the du­ra­tion of ti­tle

For a sin­gle house pro­vided upon the right to use only, the du­ra­tion is 30 years. This right to use can be ex­tended by 20 years and can be ex­tended again to 30 years when it ex­pires. For a sin­gle house pro­vided upon the right to use above the right to own, the du­ra­tion shall not last for more than 30 years. This right to use can be ex­tended by 20 years by agree­ment with the land owner. When this ex­pires, the for­eigner and the land owner can again en­ter into an agree­ment to ex­tend it for an­other 30 years. Note that such ex­ten­sion can be con­ducted as long as the re­spec­tive for­eigner still has a stay per­mit in In­done­sia, and the agree­ment must be recorded in the re­lated land book ( buku

tanah) and land right cer­tifi­cate ( ser­ti­fikat hak atas tanah). For a sin­gle house pro­vided upon the right to use above a land with right to build ( hak guna ban­gu­nan), the du­ra­tion is as long as the avail­able re­main­ing time of the pre­vi­ous right to build. This right to use can be ex­tended by 20 years and can be ex­tended again by 30 years when it ex­pires.

4. Find a suit­able prop­erty that matches the min­i­mum price re­quire­ment

To pre­vent prop­erty prices from be­com­ing too high for or­di­nary In­done­sian cit­i­zens, In­done­sian prop­erty law pro­vides min­i­mum prices for for­eign­ers to pur­chase prop­erty. As a con­se­quence, the pur­chase price for a for­eigner is much higher than for lo­cals. Other than the min­i­mum price pol­icy, In­done­sian prop­erty laws lim­its for­eign­ers to a) one plot of land per per­son/ fam­ily, and b) the plot of land is lim­ited to 2000 me­ter squares. The lim­i­ta­tion of 2000 me­ter squares can be ex­empted if the land ful­fills the con­di­tion that it has ex­tra­or­di­nary pos­i­tive ef­fects on the econ­omy. Th­ese lim­i­ta­tions are not ap­pli­ca­ble to the premises of the rep­re­sen­ta­tives of for­eign coun­tries and/or in­ter­na­tional bod­ies.

5. Ar­range fi­nanc­ing

Es­pe­cially for new de­vel­op­ments, prop­erty de­vel­op­ers of­fer at­trac­tive pay­ment terms that al­low pay­ment by in­stall­ments di­rectly to the de­vel­oper. Gen­er­ally this would re­quire a down pay­ment of for ex­am­ple ten per­cent of the prop­erty value, with the balance payable over 36 months.

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