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5 Reasons Why It’s Time To Invest in Indonesian Real Estate

Overseas Property | February 16, 2022

For many years Indonesia has decreed that land in the nation can only be owned by Indonesian citizens. Thus, it would have been legally impossible for foreigners to buy a property. But over the years, Indonesia moves to make it easier for foreigners to own property. This game-changing law has been welcomed by the industry and end-users alike since the property in Indonesia is considered a smart and profitable investment. 

The Minister of Agrarian and Spatial Planning, Sofyan Djalil, told Indonesian property tycoons during a webinar in July 2020 that upcoming new rules would provide foreigners with similar ownership rights as locals. While that has not quite happened, foreign ownership law has indeed been made to be more investor-friendly. It lines up with the government’s call which seeks to leverage foreign property investment as one of the pillars to reboot the nation’s economy after the pandemic. Long story short, it is safe to say that it is a grand cue for you to take action if you have been thinking about buying properties in Indonesia or investing in its real estate sector. To convince you even more, here are 5 reasons why now is the time to buy properties in Indonesia!

1. Foreign ownership now is closer to freehold than ever

One may find the real estate transactions in Indonesia pretty straightforward yet tricky at the same time. Why? Based on Government Regulation No 5 of 1960 about Basic Agrarian Principles, there are several rights over lands and properties. If you are trying to find a house for sale in Indonesia, you are required to at least have the Right of Use to buy it.  

In this regard, the land is owned by the government or other private parties. The obligations and rights fall under government agreement with the owner, as long as it is not contrary to the act’s provision. The period follows the latest regulation (no.103/2015) which allows foreigners or expats who legally stay in Indonesia to own the landed house for a maximum period of 80 years.

Regarding the game-changing law in foreign ownership, now you can also purchase using the Right to Build title. With this title, it means that you could have rights to establish and have buildings on the land that is not under your ownership and prevail for up to a 30-year period. The right is extendable for 20 years and can be shifted to another party. If you can make a real long term plan for ownership, this is the closest thing to freehold status a foreigner can hold. 

With these limitations on property ownership for foreigners, there are alternative ways to safely own real estate in Indonesia. First, you can find and buy the property through a verified Special Purpose Vehicle (SPV) serving as your local representative in Indonesia. Another way, you can use an Indonesian nominee which, of course, will spare you from all the bureaucracy. However, the person will be the legal owner according to law. So it is really important to choose someone who you really trust.

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2. Yes, you can legally rent out your property!

When foreigners or their heirs are no longer staying in Indonesia within one year, they have to transfer the ownership rights to someone eligible. Or else, the state would take back the house unless they could prove that reasonable efforts to sell had failed. However, in most practices, just being anywhere in Indonesia for one day would reset the clock of the one-year policy. But, what if it comes to a time where it is best for you to just rent out the house? 

Foreigners have no right to rent their property as an individual. However, it can be made possible through a PT PMA. It is sort of a local but foreign-owned company you need to establish (mostly with assistance from third parties). This way, you are not only able to legally rent your property, but you can also do other business activities through this form of company. 

For the record, a house for rent in Indonesia is always on the menu for both local residents and expats alike. It is a never-ending demand, so it is your time to step up and take the role of an investor yourself.

3. Properties in the Jakarta CBD are reasonably affordable

For the middle and longer-term, Indonesia’s property sector is promising and one of the reasons is that the property prices are still among the cheapest in the Southeast Asian region. When we look at the price per sqm to purchase a house or an apartment in the CBD of Jakarta compared to purchasing in other CBD’s around the region, we find that Jakarta is significantly discounted.

In 2020, the average price for a landed house between 250 and 300 square meters in Pondok Indah, Jakarta amounted to IDR 12.8 billion or around 7 million HKD. Pondok Indah is one of the most prestigious residential areas in Indonesia which is also located close to the CBD. In comparison, the price for the same-size landed house in another part of Jakarta, Cibubur, is only around 1.5 million HKD. 

5 Reasons Why It’s Time To Invest in Indonesian Real Estate

In another comparison way closer to home, Hong Kong has the world’s least affordable housing market with the average price for commercial housing hovering around HKD 200,000 per square metre. And, no, we are not talking about landed houses because they are almost completely out of the menu. 

Despite lifestyle preferences, landed houses practically offer more spaces for us to live–and Indonesia has plenty of them, even in the CDB area. Having a property in Indonesia can even be a retirement plan if you are not looking for housing in the immediate future.

Take notes that there is a price mechanism for foreign ownership in Indonesia. It depends on the specific rules per zone. In the capital city of Jakarta itself, a foreigner can only buy a landed house that is worth at least IDR 10 billion or 5.5 million HKD. As for apartments, the price tag needs to be at least IDR 5 billion or around 2.7 million HKD. 

4. Your own slice of paradise starts at 1 million HKD

When we say paradise, we talk about no other than Bali island. It is basically the most famous destination in Indonesia in terms of tourism. The world knows how heavenly the island can be. Many people come from all over the globe and choose to stay. Fortunately, with the new law of foreign ownership, having your second (or even first) home on this beautiful island is more than just a pipe dream now. 

The fact that you can literally own your own piece of paradise is a massive reason to purchase property in Indonesia. Especially now, when more and more people work from home. With a suitable arrangement, a data-wpel-link=”exclude” calculated mortgage, and a will to start a new life, you can choose wherever you want to be. 

Bali freehold prices, after climbing for years, have declined by about 25 per cent due to the pandemic. You can easily find houses for sale in Bali with a price tag starting at only 1 million HKD. And we are not talking about regular houses, we are talking about beautifully architectured villas with 3 bedrooms and a private swimming pool in locations such as Canggu, Seminyak, and Ubud. This is it. There is no better time to truly call the Island of the Gods your home. 

5. It is just in time for villa business in Bali!

5 Reasons Why It’s Time To Invest in Indonesian Real Estate
Luxurious villa in Bali

Drawing millions of tourists each year, one can say that the villa business in Bali is quite promising. In fact, many expats have already capitalised on its economy by building hostels and guesthouses for backpackers or villas and resorts for tourists who want to enjoy Bali with all its luxury. This is a perfect time if you want to take a step forward and join the hospitality industry.  

The most reliable way to start a guesthouse or villa in Bali is, of course, to register a PT PMA. It makes your business an Indonesian legal entity. The interesting part about starting a villa business in Bali now is that many people, either locals or tourists alike, choose to take advantage of the pandemic situation and “live” in Bali for a little while. 

It is good for business, nonetheless. The Indonesian government even started a campaign that goes by the hashtag #WorkFromBali to encourage more people to come and essentially keep the tourism industry alive. With all of these advantages, smart investors with capital to spare would never miss the opportunity.

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