JAKARTA - The Indonesian government is close to finalising a regulation that would allow foreigners to own apartments after President Joko Widodo approved the proposal, top government officials said.
The President has agreed in principle to the idea of allowing foreigners to own Indonesian residential assets to boost the attractiveness of the local property sector, Mr Teten Masduki, a member of the President's communications team, said in a recent statement.
Coordinating Economic Minister Sofyan Djalil confirmed on Wednesday that the new regulation would be issued after it is finalised in the upcoming two or three Cabinet meetings.
Mr Sofyan insisted that the regulation, which would allow foreigners to own a flat with a value of more than five billion rupiah (S$500,000), would not trigger a price bubble in the property sector as it was specifically targeted at, and limited to, the luxury-apartment market.
"The regulation will be identical to the existing one allowing foreign companies to lease (commercial) space up to 30 years. However, the new one covers not only foreign companies, but foreign individuals," Tourism Minister Arief Yahya explained.
"The new proposal will be good for investment and capital flow into Indonesia, as well as our tourism industry," he said.
The Indonesian government currently bans foreigners from directly buying property in Indonesia, although many do so through their Indonesian spouses or other citizens.
Foreigners are allowed to lease property in strata title-type properties, through a building ownership certificate - which excludes land rights - valid for a 25-year period with the opportunity to extend.
Investment Coordinating Board chairman Franky Sibarani said he had suggested the ownership period be extended to 50 years, with an option of two 15-year extensions.
Rules on foreign ownership of apartments, he suggested, could be loosened in special economic zones to attract more expatriates, which could help boost the local economy. "Many foreigners, in fact, own property assets in regions by using other (local) persons. We must acknowledge that such a loophole exists," he argued.
According to developers, the property sector has seen sluggish demand in the past year on the back of a slowing economy, which decelerated to 4.7 per cent in the first quarter this year, the slowest level in five years.
To revive economic growth and resuscitate the property sector, Bank Indonesia on Wednesday relaxed its loan-to-value ratio, with local consumers now allowed to buy houses with smaller deposits.
The loosening of foreign ownership of property assets would apply only to high-rise apartments and there might be different regulations for Indonesian and foreign property owners, said Mr Syarif Burhanuddin, the Public Works and Public Housing Ministry's director-general of housing.
"We welcome the opening up (of the property market) to foreigners. The potential impact is huge: developers will benefit and our economy will grow," Mr Syarif said.
The Indonesian Real Estate Developers Association (REI) last month also welcomed the planned luxury apartment regulation as property developers have been struggling to boost demand.
Developers are convinced the regulation will not disrupt overall market prices and middle-segment demand as the government plans to set a minimum price for foreign ownership, REI chairman Eddy Hussy said.
"Foreign ownership of property will create a multiplier effect and add value to the economy, because we will see more foreign money coming into the country," REI chairman Eddy Hussy said.
THE JAKARTA POST/ASIA NEWS NETWORK