A new government regulation scheduled for implementation in May has promised a legal breakthrough that would allow foreigners to own property in Indonesia, albeit restricted to condominiums only.
In the past, efforts to open the property market to foreigners were hampered by the prohibition on land ownership, which would remain intact as demanded by existing laws.
The upcoming regulation seeks to overcome that problem by simply providing foreigners with the right to apply for the purchase of a Building Ownership Certificate (SKBG) that is completely detached from land rights.
“They can own apartment units under the SKBG without having the land,” Pangihutan Marpaung, the deputy on formal housing at the Public Housing Ministry, told The Jakarta Post recently.
Pangihutan said foreigners could hold SKBGs for 60 years with the possibility of extending them by another 60 years, thus making condominium ownership in Indonesia more competitive than in Singapore, which allows 90 years of ownership.
“There is a good chance for extending the certificate for another 60 years, but we are still discussing it further,” he said.
Under present rules, foreigners may lease property for 25 years that can be extended for further periods of 25 years and 20 years, or 70 years in total. Unlike the right to lease, the SKBG can change hands and can be traded.
The opening of the domestic property market will not come without a set of restrictions, Pangihutan said. Non-nationals will not be allowed to participate the condominium resident associations, which according to the law hold the right to manage condominiums as well as to communicate residence-related issues to property developers and the government.
In addition, the upcoming regulation will also limit how many units in a condominium tower can be owned by foreigners. According to Pangihutan, the ministry is considering 40 percent foreign ownership at the maximum for each tower.
Pangihutan said the regulation also sought to determine which cities in Indonesia were allowed to have foreign ownership. So far, Jakarta, Bali and Batam have been short-listed. More cities such as Medan in North Sumatra and Balikpapan in East Kalimantan are still being considered.
Medan is an emerging tourism city and a gate to western parts of the country, even more so with the construction of Kuala Namu International Airport. Balikpapan, on the other hand, is an oil and gas rich city in the eastern part of the country with a bustling expatriate community.
The government will also set a minimum price per square meter. So far, the government still sticks to property worth at least Rp 2 billion (US $220,000). However, that figure might be changed.