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Foreigners Can Now Buy Apartments, How Will This Affect the Property Sector?

Foreigners buy property in Indonesia
Foreigners Can Now Buy Apartments, How Will This Affect the Property Sector?

President Joko Widodo (Jokowi) has issued Government regulation no. 18 year 2021 concerning management rights, land rights, unit flats, and the land registry.

This rule is a derivative of the provisions of Article 142 and Article 182 letter b of law number 11 of 2020 concerning job creation, otherwise known as the Omnibus Law.

The regulation states that foreigners or foreign citizens can now own an apartment unit.

Ownership rights to apartment units are granted to Indonesian citizens; Indonesian legal entities; foreigners who have permits in accordance with the provisions of laws and regulations; foreign legal entities that have representatives in Indonesia; or representatives of foreign countries and international institutions that are or have representatives in Indonesia,” read the full article 67.

Not all foreigners are free to live and own a condominium unit, as stated in article 69.  Instead, only foreigners who have an official immigration permit can own a condominium unit or residence.

What will be the impact of apartment ownership by foreigners on the property industry?

Responding to this, Deputy General Chairperson of Real Estate Indonesia (REI) Bambang Eka Jaya said the apartment ownership policy could encourage growth in the property sector. This will be especially in the upper-middle segment of apartments worth more than Rp5 billion.  

Bambang explained that the current demand for middle-class housing tends to be sluggish. Due to high prices, the contribution of this middle-class residential sale is very large to the growth of the property sector. 

Now, sales in the middle-class housing segment are practically suspended. In fact, in percentage terms, the number of units may be small, but the value is large. Imagine that one foreign transaction could be equal to 10 to 20 units of lower-middle property,” he said. 

That is, even though the maximum unit is only a handful or two percent, the value can be more than 20 percent. Therefore, REI agreed that the purchase of apartments by foreigners should be limited by price.

In addition to encouraging property growth, it is also needed to maintain housing in the lower middle segment that can be bought by the people of Indonesia. 

The government regulation also explains that foreigners who can own a house or residence are foreigners who have immigration documents in accordance with the provisions of the legislation. Furthermore, it was also emphasized that the ownership of a condominium unit or residential house by foreigners only has the status of usufructuary rights.

Foreigners are not allowed to buy or own flats or dwellings in Indonesia without limitations. There are a number of restrictions that are applied, such as price, plot size, and even the number of units in the development.

Ownership of residential houses or residences for foreigners as referred to in article 71 is granted with the following limitations: minimum price; land area; the number of land parcels or units; and designation for residential purposes.

Further provisions regarding the procedures for granting and limiting ownership of residential houses by foreigners, as referred to in article 69 to article 72, are regulated in a ministerial regulation.

Furthermore, if a foreigner who owns a condominium unit or occupancy in Indonesia with this usufructuary status dies, the ownership of the condominium unit can be passed onto their heirs. In the event that the heir is a foreigner, the heir must have immigration documents in accordance with the provisions of the legislation.

Government regulation no. 18 year 2021 concerning management rights, land rights, unit flats, and the land registry has been in force since enacted on 2nd February 2020.

If you are interested in buying real estate in Indonesia, we recommend contacting Terje Nilsen (founder of Seven Stones Indonesia), he knows all about the matter and he would be happy to assist. His email is [email protected]

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