Foreigners may be allowed to own apartments and even commercial property in Indonesia under a revised rule expected by the third quarter of this year, Indonesia’s investment chief said yesterday.
The move is likely to draw investors into South-east Asia’s biggest economy and increase the flow of foreign capital into the country.
‘The government is committed to continuously review policies to make it easier to invest in Indonesia,’ said Mr Gita Wirjawan, chairman of the National Investment Coordinating Board, at a forum in Singapore yesterday.
‘I am optimistic that once we can be seen to be taking steps in the right direction, we’ll be able to reach a 15 per cent increase in foreign investment over last year’s US$14 billion (S$19.6 billion).’
His remarks were welcomed by property market watchers and expatriates in Jakarta. It was the clearest indication yet that the government was relaxing the rules on foreign ownership of property in the country, they said.
The move also comes at a time when improving fiscal stability could earn Indonesia an investment grade sovereign rating within a few years, according to Bloomberg News.
At present, foreigners can only buy property in Indonesia through a nominee or local Indonesian firm, putting the buyer at risk.
Foreign companies are not allowed to own property. They only have the right to use land for a period of 25 years, which is renewable, and the right to lease buildings.
‘The thinking is, anything above a certain floor, you can buy… anything closer to the ground has political sensitivity,’ Mr Wirjawan said in an interview with Reuters.
Analyst Willson Kalip, the country head of Knight Frank Indonesia, told The Straits Times that the move to invite foreign participation in the property market will be seen as a positive gesture. The property market has always been geared to meet domestic demand, he said.
‘It will be a boost as already foreign investors from China, Singapore and Malaysia have shown interest in buying office space for their longer-term investments,’ he added.
Long-term resident Michael Tan, a Malaysian, told The Straits Times that the new rules on property ownership would be an incentive for expatriates like him who have always looked forward to owning their own homes in Indonesia.
Foreign companies like his can own property, but the ownership is considered as hak pakai – the right of use – or hak sewa bangunan – the right of a building lease. ‘What we need is hak milik, or right to own,’ said Mr Tan.
Asian residential property prices have been booming on strong investor interest and low interest rates, leading to fears of bubbles in some countries.
Mr Wirjawan said Jakarta condominium prices were undervalued compared to Singapore and Vietnam’s Ho Chi Minh City.
‘Investors are optimistic about Indonesia relative to, say, Thailand and Malaysia,’ said Mr Colin Tan, director of research and consultancy at Chesterton Suntec, a real estate advisory firm, according to Reuters.
‘If you open a new channel for investments, some money will definitely come in… It can only be good for Indonesia’s property market.’
Source: Straits Times, 1 Apr 2010