Mushrooming: Apartments have mushroomed in Jakarta, as seen in this night view of Sudirman Park Apartments (center) and Pavilion Apartments. Indonesia's property market still has a long way to go to attract foreign ownership. A strong economy and strong law enforcement are essential to attract foreigners to own apartments in Indonesia, a number of analysts have said.They were responding to the government's plan to allow lifetime ownership of Indonesian property for foreigners. Currently, foreign ownership of Indonesian property is regulated under Agriculture Law No. 5/1960, which allows expatriates only to use property for personal use, and not own it. The deliberation has sparked heated public debate. The Indonesian Real Estate (REI) association is among the institutions supporting the idea.According to property consultant Indonesian Property Watch (IPW) director Ali Tranghanda, the abovementioned two factors will attract expatriate workers into Indonesia, thereby boosting foreign apartment-ownership in the city. Property consultant Cushman Wakefields vice chairman Handa Sulaiman is of the same view as Ali. 'In order to attract expatriates to buy property here, their right to own and resell Indonesian property must be guaranteed by the law,' Handa told The Jakarta Post. In promoting lifetime foreign ownership, the government has argued that foreign property ownership will boost Indonesia's foreign exchange. 'The government should not turn the argument upside down. We need to take care of and improve our economy first. Expatriates will come here only if there are secure employment opportunities available,' Ali said during a recent telephone interview.Expatriates who worked for only a short stint in Indonesia would not be interested in buying property, he said, except for those who planned to retire in the country.He added that Indonesia did not yet have an adequate supply of property for foreigners, citing Jakarta, which had only a 10 percent property supply for expatriates, as an example.Handa echoed Ali's statements, saying that expatriate workers in Indonesia made up only a small market for the country's property industry. He refused, however, to comment on the market share of expatriates in Indonesia's property industry, citing a lack of research.Ali said that the small number of expatriate workers in Indonesia rendered futile the government's wish to boost foreign exchange by allowing them to own property.Meanwhile, Indonesia Real Estate and Housing Association chairman Eddy Ganefo, as quoted by kompas.com, criticized the government's plan, recommending that strict requirements be made for expatriates interested in owning local property to prevent steep price increases, citing Singapore as an example. High-rise living: Green View Apartments in Pondok Indah, South Jakarta.(Photos: JP/Arief Suhardiman) Singapore only allows expatriates to own property in the country when a maximum 20 percent of its total population does not own homes. This regulation was set up after expatriate ownership in the country caused a steep increase in property prices.He added that aside from Singapore, Australia also restricted foreign ownership of property following indications that the nation was growing a property bubble. Currently, Dubai is also on the same path.Indonesia already had Government Regulation No. 41/1996 on foreign property ownership, Eddy went on. The government's supervision regarding the regulation's implementation, which is essential to prevent property bubbles from emerging, however, is still very weak.He alleged that some expatriates used the names of their Indonesian spouses to buy property, demonstrating the weakness of supervision of the regulation's implementation by state officials, developers and public notaries.'When we are able to regulate foreign ownership properly, the government will be able to collect tax from expatriates,' Eddy said.Vice President Jusuf Kalla, also quoted by kompas.com, emphasized the importance of learning from the example of other countries in terms of regulating foreign property ownership in Indonesia.He said that the government needed to set a price cap regulating foreign ownership of property.He suggested that expatriates only be allowed to own property priced above Rp 5 billion (US$ 354.5 million) to prevent them from buying cheap houses reserved for those from middle to lower socioeconomic brackets.'We should not forget that many expatriates come from developed countries, so it is unfair if they are able to buy property with cheap prices here. If they are allowed to buy houses that are priced at Rp 50 to 100 million, I'm afraid that our rural areas will be densely populated. That is why we need to copy other countries that set price caps for property ownership,' he said recently.Kalla's statement opposed the proposal made by Agrarian and Spatial Planning Minister Ferry Mursyidan Baldan to allow foreigners to own Indonesian property without any price caps.Ali added that the lifetime foreign ownership of Indonesian property was unfair when compared with the ownership period for Indonesians, which was only 30 years. 'I think expatriates will be happy just to be allowed to use property in Indonesia for a 20- to 25-year period,' he said.According to Ali, instead of focusing on foreign property ownership, the government should focus on foreign property investment instead.'It is more beneficial for us, because when big foreign investors like Keppel and AEON come to Indonesia, they bring capital and help to drive related industries,' he said. Your premium period will expire in 0 day(s)
Although the Indonesian government is seeking to change regulations which ban the ownership of property by foreigners in a bid to boost the country's economy, these efforts alone will not be enough to attract real estate investment from abroad, claims The Jakarta Post. Analysts believe that the already weakened Indonesian economy and lax law enforcement will continue to deter foreign investors despite extensive government promotion.