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Call to Extend Limits on Foreign Land Ownership

Realtors Claim Maximum Land Use Limits of 25 Years for Foreigners is Stifling Property Investment in Indonesia.

(12/12/2005) As reported in the Indonesian-language Bisnis Indonesia, Indonesian realtors are complaining that current restrictions on apartment ownership by foreign nationals are thwarting an otherwise strong market demand from foreign nationals seeking to purchase property in Indonesia.

Handa Sulaiman, a Director of Procon - a major property consulting firm, said the purchasing capacity and demand by foreigners for Indonesian property, especially apartments, was very high. The strong interest in purchasing property in Indonesia by foreigners is always made problematic by legal complications surrounding ownership.

In addition to restrictions that limited property use by foreigners to a maximum of 25 years, property transactions between Indonesians and foreigners are also subject to sales taxes of up to 20%. Handa complained, "such facts make (Indonesian property investment) unattractive for foreigners."

Malaysia More Welcoming

The property consultant went on to cite the example of Malaysia where a number of government-endorsed programs have been launched to encourage apartment purchases by foreigners. As a result, apartment purchases by foreigners have grown year by year since its introduction in 2002, with 2,646 apartments sold to foreign nationals in Malaysia in 2005 calculated through the month ending October.

Land Use of 60-80 Years?

Similarly, the Chairman of Real Estate Indonesia (REI), Lukman Purnomosidi, is urging the Government to consider extending the time limits for property use by foreigners from the current maximum 25 years to a period of 60-80 years.

Purnomosidi says such a move would potentially expand the residential property market by as much as US$ 5 billion per year. He went on to explain that substantial markets for luxury apartments owned by foreigners exist in a number of Indonesian cities with direct foreign air access such as Jakara, Batam, Bandung, Surabaya and Bali.

Another observer of the Indonesian property market, M. Rizal, urged the Government to establish pilot areas in Indonesia to introduce both land and apartment ownership by foreigners.