52 | INDONESIA WORDS | Francine Carrel


recent months. Staggering increases in luxury property prices, as well as favourable predictions for the market, have meant that more eyes have been drawn to the country. Indonesia, the world’s fourth most


populous country, saw a decline in growth last year – 6.11% in Q4 2012, down from a revised 6.16% in the third quarter. However, the real estate market


seems to be bucking the trend. Bullish sentiment abounds, with Jakarta recently being named the top real estate investment market in the Emerging Trends in Real Estate Asia Pacifi c 2013 report, published by the Urban Land Institute (ULI) of Washington, DC and PricewaterhouseCoopers (PwC). Jakarta is the capital city of


Indonesia, holding a population of 10 million. Until recently, large real estate investors have often overlooked


Is Indonesia worth it? T


he Indonesian real estate market – especially in Jakarta – has been a hot topic in


it. However, the seemingly never- ending string of cooling measures introduced into the more established Asia-Pacifi c markets has led investors to widen their horizons and look a little further than Hong Kong and Singapore.


Signs of this change in perspective are already showing. Jakarta and Bali topped the charts in Knight Frank’s index of price growth for luxury residential real estate. Jakarta saw a huge increase of 38% (from US$250 to US$346 per square foot) between 2011 and 2012, while Bali tied second with Dubai after seeing an increase of 20% (from US$224 to US$269 per square foot).


Even with these substantial swells, though, neither of the cities ranked in Knight Frank’s top 20 most expensive real estate markets (topping the list is still Monaco, at around US$550 per square foot). Indonesia is starting to seem a rosier proposition to foreign investors, despite its list of well- known problems.


Issues in Indonesia


Ah, yes, the problems. First and foremost it should be mentioned that Indonesia is not the easiest place to invest in if one is a foreigner. Miles of red tape and regulations that are quick to change and slow to be published only add to the country’s strictness when it comes to outside investors. Indonesia is ranked at a paltry 128 out of 185 in the World Bank’s ‘Ease of Doing Business’ index.


“It should be mentioned that Indonesia is not the easiest place to invest for foreigners”


There are sources littered across the internet claiming that only Indonesians can buy and own real estate in their country – making leasing the only viable option for foreigners. It must be noted, though, that there are in fact foreigners owning property in Indonesia. Bali has many expats from America, for example, owning villas and resorts. In Jarkarta, you are likely to fi nd Japanese and Koreans investing in residential properties.


Buzzing | Capital city Jakarta is one of Asia’s most lively destinations


So, what are the rules? According to the law, a foreigner who resides in Indonesia can legally own a residential property – as long as it is built on land with a ‘Hak Pakai’ (right of use) title. Indonesian law covers several such titles, the most common of which according to Jones Lang LaSalle are: • Hak Milik’ (freehold) – exclusively for Indonesians; • Hak Guna Bangunan (right to build) – for companies and institutions; • Hak Pakai – for companies and institutions, including foreign individuals. Confusingly, these titles can be ‘layered’ to make the process of investment easier and more lucrative. The process can get convoluted – the most clear sources I’ve found (on obtaining a visa and land titles, respectively) can be found at: • www.expat.or.id/info/docs.html • blog.ssek.com In December, Executive Director of Indonesia Property Watch (IPW) Ali Tanghanda made a statement saying


BUSINESS


www.opp-connect.com | APRIL 2013


Indonesia has been hitting the headlines in recent months – for all the right reasons. The luxury property market is booming and investors are starting to feel that negotiating the tricky red tape in the country might be worth it after all. Francine Carrel takes a quick look at the market and what you can expect


that the country needed to develop clear rules in the game of regulation, including a minimum spend on a property, more clear-cut defi nitions of who is considered a foreigner and a way to deliver “appropriate compensation” for the low-income owners whose land is purchased.


“The limitations and separation of ownership rights should be set. However, the problem is not that simple – as when foreigners buy real estate in Indonesia, the prices will signifi cantly increase… leading to a bubble,” Ali said.


He said that the government should not only consider the potential profi ts from welcoming foreigners into the market, but to be wary of the price rises this might stimulate.


“Indonesia is not ready as we almost have no more land bank left to develop for low-income earners,” he added. The chairman of the Indonesian Real Estate Association (REI), Setyo Maharso, also called for change to reduce the “misuse” of land in the real estate sector and rein in the misappropriation of the country’s foreign exchange earnings.


“Foreigners may only purchase the above IDR2.5 billion [around USD$2.5 million] apartment units. They are also subjected to some 40% value added tax on luxury goods (PPnBM) and to stay in Indonesia for at least 14 days. REI is trying to eliminate the law abuse,” he said.


Added to the befuddling range of foreign ownership rules are the facts that it can be diffi cult to fi nd inexpensive bank loans in Indonesia and, according to some sources, trustworthy local partnerships.


Conclusion Indonesia is defi nitely a market worth keeping your eye on, if you can navigate the laws and other diffi culties. Big real estate companies are starting to move in the country and the prices are still – while high in real terms – well below that of some other luxury markets and rising quickly.


If you’re experienced in Indonesian real estate, we’d love to hear from you. Send any advice or anecdotes you’d like to share to Francine.carrel@opp- connect.com.


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