Calls grow for foreign property ownership

Calls grow for foreign property ownership
Monday, February 27, 2006

Anissa S. Febrina, The Jakarta Post, Jakarta

Many long-term expatriate residents here cannot consider Indonesia a welcoming second home when they are barred from owning property here.

"Property ownership is the core around which one builds one's life. Why should foreigners be handicapped here?" complains Robert Eskapa, a British businessman who has opened a pizza-chain in Indonesia.

"Many foreigners are forced to buy property through some firms here. The firms buy them on our behalf and we end up paying them up to US$100 a month for such a service."

Restrictions on foreigners owning property here, as stipulated in a 1960 law governing use of land, water and space, have been blamed for deterring investment and helping add to the high-cost economy.

With the government revising the land law, property analysts and developers are joining expatriates in urging its expeditious passage.

Currently, foreigners are only entitled to the rights to use, cultivate and build property for a maximum period of 25 years.

"The maximum period varies between provinces, depending on the policy of the local administration," National Land Agency (BPN) legal bureau head Reiner Manurung told The Jakarta Post.

The policy has deterred investment in several regions, particularly areas with sizable expatriate communities.

"Many Singaporeans, for instance, are interested in owning shop-houses and opening businesses in Batam, but the regulation discourage them," he said.

In contrast, foreigners can purchase property and seek local financing support in Singapore, developer Far East Organization (FEO) said.

The Indonesian market is a prized target for Singapore realtors. FEO, which will launch sales of its Orchard Scotts condominium here in March, said foreign nationals accounted for 44 percent of high-end property buyers in the city-state last year.

With lending interest soaring as high as 20 percent, and risking hurting property take-up, foreign investment would help pick up the slack and revive the sector.

Chief analyst at the Center for Indonesian Property Studies Panangian Simanungkalit said Indonesia would benefit from following the example of its neighbors in opening up its property sector, especially in areas such as apartments.

A CIPS study revealed that the apartment subsector alone contributed 17 percent, or some Rp 12 trillion (about US$1.3 billion), to total Indonesian property market capitalization.

The chairman of the Indonesian Real Estate Association, Lukman Purnomosidi, estimated the country could reap at least $10 billion in foreign investment in the next five years should it decide to open the sector.

"That's only the potential in seven major areas -- Jakarta, Batam, Medan, Pekanbaru, Bali, Lombok, Makassar and Manado," he said.

BPN land information deputy head Chairul Basri Achmad said the revised draft might contain a clause extending a leasehold period for foreigners to up to 50 years.

"We hope it will be applicable by the end of 2006," he said.

Although the draft revision of the land law has been completed, BPN still needs to hold public consultation sessions before submitting it to the House of Representatives, Chairul said.

For Eskapa, the sooner such foreigner-friendly policies are introduced, the better it will be for the investment climate.

"It's not like we are going to cut out the property or land and take it away from this country," he added.