70 Year Foreign Ownership Term Not Interesting

Development companies see that the 70 year term for apartment ownership rights for foreigners is not interesting enough. Companies are also skeptical whether the regulation can be implemented, considering that the National Land Agency (Badan Pertanahan Nasional) has not given the green light yet on the term.

Setyo Maharso, Chairman of the Indonesian Association of Real Estate Companies, said that the 70 year term is not that attractive for investors. In order to compete, the association has previously suggested that the term should be extended for 90 years, as in Singapore and Malaysia.

“A 90 year term is more interesting for foreigners because it is comparable to the two countries closest to Indonesia. Many foreigners work here for long periods. They would even stay in Indonesia after they have retired,” he said, Thursday.

According to Government Regulation Number 41 Year 1996 on Housing or Residential Ownership for Foreign Citizens Based in Indonesia, which is currently in revision, foreigners are only allowed to purchase apartments with a maximum ownership status 25 years, which can be extended two times after 25 years and 20 years. This pattern is burdensome for foreign citizens, especially the extension of usage rights.

Setyo also doubts the effectiveness of the implementation of a 70 year term. According to him, this could potentially not be applied since the National Land Agency has not given the approval yet regarding the revised foreign ownership term. It is suggested for the House of Representatives to coordinate with the land authorities in Indonesia.

It is likely that the House of Representatives will approve the property usage right term for foreigners in Indonesia for 70 years, without extensions. Muhidin M. Said, Vice Chairman of Commision V, said that the discussion of foreign property ownership in the Draft of Regulation on Vertical Housing has reached 90 percent, including the issue of ownership term.

The discussion on the draft of Regulation on Vertical Housing has reached the final discussion phase and is expected to be completed in June 2011.

Tomi Wistan, Chairman of the Indonesia Real Estate, North Sumatera Branch, said that the offering of a 70 year ownership term is not so interesting for foreign investors since ownership usage rights in Singapore and Malaysia is 90 years. However, he sees the regulation as a step forward.

Legal Protection

Jopy Rusli, Director of PT Lippo Karawaci Tbk (LPKR), hopes that the government will explain the provision to the public so that it will be known in the business world and to foreign investors. He said that the regulation can be an opening for foreign investors to Indonesia. This is also an opportunity for the government to bring in direct foreign investments that can be used to hasten national infrastructure development.

“Seventy years is quite long, although developers hope that there will be a revision so that the regulation can be implemented for 90 years to make national property sector more attractive,” Jopy said.

Tony Eddy, property practitioner, said that the extension of foreign ownership usage rights in Indonesia may not attract foreign investors to buy property. He points to the weak legal protection for property buyers in Indonesia as the main cause. He said that there are many developers that default, are late in handovers, or develop with a lower specification than what is already promised to consumers.