Premhouse.com JAKARTA | On 28th December 2015, Indonesia
put into effect a new regulation stipulating revised and newly-introduced rules
on property ownership for foreigners. The Joko Widodo
administration last year hinted at a complete regulatory revision to the now
defunct Government Regulation No. 41 of 1996 (See Indonesia
Opening the Door to Foreign Ownership of Property).
While the new regulation – Government Regulation No. 103 of 2015 regarding the
Ownership of Homes or Residences by Foreigners Residing in Indonesia – sheds
light on the legal rights for foreigners seeking to purchase a home in
Indonesia (See Ownership
of Homes or Residences by Foreigners in Indonesia), it
is not considered a groundbreaking policy.
Though Government Regulation No. 103 of 2015 clears up several ambiguities that plagued the original law on foreign ownership of property including eligibility requirements and inheritance issues, property consultants and industry analysts remain underwhelmed. The primary criticism of the regulation is its failure to allow property purchases by foreigners residing and working outside of the country which therefore limits the potential of Indonesian property as an investment vehicle.
Though Government Regulation No. 103 of 2015 clears up several ambiguities that plagued the original law on foreign ownership of property including eligibility requirements and inheritance issues, property consultants and industry analysts remain underwhelmed. The primary criticism of the regulation is its failure to allow property purchases by foreigners residing and working outside of the country which therefore limits the potential of Indonesian property as an investment vehicle.
In spite of the market’s
unimpressed reaction to Government Regulation No. 103 of 2015, the law
complements President Joko Widodo’s
first economic policy package (See Indonesia's
New Economic Package: A Disappointing Start to Deregulation) by
allowing foreign ownership on landed houses and apartments under certain
circumstances. While Indonesia maintains strict restrictions on foreign
ownership of property in comparison to ASEAN counterparts Malaysia and
Singapore – whose policies only require foreigners to meet technical criteria
such as a minimum price threshold and government approval, respectively – the
issuance of Government Regulation No. 103 of 2015 demonstrates a
forward-thinking approach to push for greater liberalisation in
Indonesia’s property market.
Regulation
details
Setting itself apart from preceding
amendments, the new regulation introduced by the Joko Widodo
administration clarifies the qualifications needed to be met by foreigners in
order to purchase residences which were not specified in the pre-existing
regulation. Expatriates with a legal stay permit, diplomatic stay permit,
official stay permit, residence stay permit, limited stay permit or permanent
stay permit that give benefit, conduct business, work or invest in Indonesia
will now have access to own apartments and landed houses under the Right of Use
title. As part of the new regulation, foreigners are entitled to property
ownership for a maximum of 80 years which is an extension from what was
previously 70 years.
Through this regulation,
Indonesia’s government has sought to clarify the qualifications and criteria
for foreigners authorised to
own properties in the country in addition to clearing up confusion in regards
to inheritance rights for heirs; children of expatriates are only allowed
property ownership rights should they also hold a legal stay permit.
Enough
of an impact?
As the latest addition to
Indonesia’s property laws, Government Regulation No. 103 of 2015 remains
largely overshadowed by unmet expectations. Analysts are waiting for a
breakthrough in existing regulations on foreign ownership of property that
would make Indonesia regionally competitive alongside highly-attractive
property markets such as Singapore. Despite the recently-announced regulation’s
perceived failure to bring about any significant changes, Indonesia’s property
market is still expected to incur growth of up to 10-12% in 2016. These
improvements are likely to take place due to improved economic conditions, the
implementation of the government’s economic packages, and the push for rapid
infrastructure development, according to Mr Eddy
Hussy, Chairman of Realestat
Indonesia (Reuters) – the country’s leading property industry organisation.
Opening
the door to internationalisation
The longstanding negative sentiment
surrounding foreign ownership of property in Indonesia has not prevented
President Joko Widodo in
going forward with plans to resolve an issue deemed unfavourable by
the public. Having been criticised last
year for issuing a number of policies perceived to be nationalistic by foreign
investors, the Joko Widodo
administration through the introduction of Government Regulation No. 103 of
2015 is making headway in improving Indonesia’s image as an investment
destination open to the international community.
As the country participates in
greater regional integration which includes its role in the ASEAN Economic
Community (See Indonesia
and the ASEAN Economic Community – Ready for Regional Integration?),
the issuance of Government Regulation No. 103 of 2015 – while lacking in
substance – is a noteworthy measure in support of a more investor-friendly
business climate. Global Business Guide Indonesia -
21st january 2016
#Photo illustration courtesy of Fotolia, Thailand Property
