Deni Ghifari, Jakarta – The government has been easing regulations on home ownership since 2021, aiming to attract more foreigners to buy properties in the country, but the effort has produced few results because of regulatory misalignment and a lack of supply.

Agrarian and Spatial Planning Ministry Secretary-General Suyus Windayana said on Aug 1 that purchases have not been substantial, revealing that fewer than 200 foreigners bought properties throughout 2017 and 2023 and "only 36 registered foreign homeowners so far in 2023".

Partly, he blamed the muted uptake on regulatory misalignments between those imposed by the central government and what regional administrations asked for when making a purchase.

For instance, a government regulation on land rights imposed in 2021 ruled out the prerequisite of providing proof of a limited or permanent stay permit (KITAS/KITAP), allowing foreigners to buy property using only a passport and/or visa.

In reality, however, regional authorities still often ask for a KITAS/KITAP, said Suyus.

The government has also imposed several limitations to make sure the property market for foreigners does not collide with that for citizens, he said.

The new regulation stipulates a foreigner is only allowed to have one plot of land with a surface area that does not exceed 2,000 square meters for a landed house.

"It may go beyond 2,000 square meters, but the foreigner must prove that the expansion can result in an economic impact," Suyus said during a media briefing, adding that such approval would fall to the ministry.

Other limitations include a minimum price, wherein the government has set the cheapest property that foreigners can buy at Rp 3 billion (US$197,600) for apartments and Rp 5 billion for a landed house in Jakarta.

Foreigners will see different minimum prices that could be much lower in other regions, with the cheapest hovering at Rp 1 billion.

Easing property ownership is part of the reforms introduced by the Job Creation Law, which aimed to loosen Indonesia's notoriously complicated bureaucracy, thereby making it easier for foreigners to work, invest and reside in the country.

The construction sector, which includes building residential housing, accounted for the fifth-largest source of economic growth in the country as of the second quarter this year, according to Statistics Indonesia (BPS). The government also regards the sector as one with the largest multiplier effect, particularly for employment and income.

Prior to the Job Creation Law, foreigners could only own an already-constructed apartment or landed house with hak pakai (right to use) status, as opposed to land with hak guna bangunan (right to build) status.

The previous rule also resulted in supply constraints especially for apartments, given that no apartment building was built on land with hak pakai status. Thus, the new regulation allows foreigners to purchase from a lot more options.

Colliers Indonesia head of research Ferry Salanto told The Jakarta Post on Thursday that he applauded the government's decision to lift foreigners' property-purchasing restrictions.

However, the regulation may not reflect the actual purchasing power of foreign purchasers, which could pose as an obstacle to the policy.

"Foreigner buying power is not like what we imagine. Not all of them are well off, because incoming foreign workers come from all levels [of income]," said Ferry, explaining that many foreign workers in Indonesia cannot afford to buy property.

Ferry said that foreigners might seem as if they were flocking to live and work in Indonesia but the nature of expats' working contracts might not always translate into demand for property.

For instance, contracts usually locate foreign workers in Indonesia temporarily, for two or three years, meaning they may not feel the need to buy property, he said, adding that they were likely to move to different places according to new assignments.

According to Colliers' data, only 20 percent of property units can be bought by foreigners in Jakarta that met the new regulation's minimum Rp 3 billion price.

However, the new property ownership regulation also paves a way for the Indonesian diaspora.

Indonesia Diaspora Network Global board of trustees chairman Dino Patti Djalal told the Post on Wednesday that members of the Indonesian diaspora would warmly welcome these new adjustments to property ownership.

"[The Indonesian diaspora] has always been advocating or seeking facilities [which would allow them] to own property in Indonesia. [...] I do believe that the market is there," said Dino.

He said there was a large Indonesian diaspora, many from a middle- or upper-middle income background, which could translate to demand.

Source: https://asianews.network/indonesia-eases-foreign-home-ownership-but-only-for-high-earners