The government's plan to allow foreigners to buy condominiums could help reduce "illegal purchases" of properties by foreigners that have tended to increase property values in the country's major cities, an official said.
Pangihutan Marpaung, the Public Housing Ministry's deputy for formal housing, said that many foreigners had purchased properties through their wives because they were not allowed to own land in the country.
Such practices apparently were growing and pushed up prices to unrealistic highs because people not only bought land for their own homes, but also for businesses and speculation, he said.
Such land speculation has also severely hurt local people, especially in Jakarta, Bali and Batam, because with the sharp increase in land prices, it would be almost impossible for them to own a house, Pangihutan said.
"We do not want foreigners playing hide-and-seek anymore. We are afraid such practices are flourishing in the country and it will hurt the domestic market," he told The Jakarta Post.
Under the regulation, which is expected to be issued in May, foreigners will be allowed to buy an apartment or condominium for a period of 60 years, which may then be extended for another 60 years.
Under the present rules, foreigners may lease property for 25 years, which can be extended for a further 25 years and another 20 years, or 70 years in total. But unlike the right to lease, the ownership right under the new regulation can be traded.
Pangihutan said that a significant jump in prices took place in strategic areas, such as Jakarta, Bali and Batam of the Riau Islands province.
According to recent research conducted by Knight Frank and Elite Havens, land prices in Bali rose up to 34 percent throughout 2011, while its normal increase rate was only around 8 to 16 percent.
Land prices near beaches in Seminyak areas, such as Legian, Petitenget and Batu Belig experienced the highest jump compared to other areas in Bali; the prices rose by 50 to 87.5 percent last year.
Knight Frank and Elite Havens said the sharp increases were influenced by the high demand among investors to build property in those particular tourism sites.
Ali Hanafia from Ciputra Group's Century 21, said that in general, land prices in big cities in Indonesia had risen by almost 100 percent for the past two years.
In the Central Business District in Jakarta, he said that land prices reached up to Rp 100 million (US $10,900) per square meter in 2012, while two years ago the price was around Rp 40 million to Rp 50 million.
In Batam, prices of land in strategic areas jumped from only Rp 8 million per square meter in 2010 to Rp 20 million per square meter this year.
Property consulting firm Jones Lang LaSalle-Procon's head of research, Anton Sitorus, said that the new regulation was a positive signal for foreigners to have property in Indonesia.
"The new regulation will lure foreigners to buy property in Indonesia, but the impact is not going to be that big because we are hampered by the 1960 Agrarian Law," Anton told the Post on Monday.
He said it would be better if the government also reviewed the Agrarian Law that prohibits foreigners from owning land in Indonesia in order to attract more foreign investment.
In a separate interview, Real Estate Indonesia (REI) chairman Setyo Maharso said that the government should not be afraid of foreigners controlling the prices of property in Indonesia.
"We do not have to be afraid because our domestic market in property is very strong. Foreign-controlled prices are not going to happen," he told the Post. He said that the current Indonesian demand for homes reached up to 12 million units. (nfo)