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Changes Urged to Permit Foreign Land Ownership

Changes Proposed to Allow Foreign Land Ownership. Government Now Scrutinizing Foreign Property Transactions.

(11/24/2008) The National Land Office (BPN) has formally asked the National Ministry for Housing and the Indonesian Real Estate Association (REI) to commence collecting information on the source of income used in property purchases involving foreign interest as a means to help control illegal money laundering.

The Chief of the BPN, Joyo Winoto, told Bisnis Indonesia that foreigners involved in property transactions must be monitored to avoid Indonesia's unwitting involvement in illegal currency transactions. Winoto explained: "In other countries the source of funds used to purchase property is one of the requirements that must be met by foreigners purchasing property. Currency sourcing is a dangerous area that must be monitored. We do not want money laundering to occur in Indonesia."

Foreign Ownership of Land to be Allowed

Winoto told the press that he has received a draft of proposed rules to govern foreign land ownership in Indonesia prepared by REI in the hopes of paving the way for a more liberalized environment for foreign land purchases. Winoto said these rules need further elaboration to address other issues, such as the minimum purchase price of properties bought by foreigners, product specifications and permissible reasons for foreign land ownership. If necessary, Winoto said, specific areas open to foreign property ownership should be designated. "The rules need to be tightened in order to avoid future problems," he added.

He also suggested that foreign nationals should only be permitted to buy certain classes of property, such as homes, shop houses (ruko), and newly built apartments in order to facilitate supervision of their property activities. Winoto want foreigners barred from participating in the secondary real estate market, forbidding foreigners from acquiring properties previously purchased by Indonesian consumers."

No to 70 Year Lease Periods

Winoto told Bisnis Indonesia that moves from the real estate sector to secure 70-year lease or ownership periods for foreigners will be difficult to grant. Such a change would not only require a change in the current rules, but such a move has already been rejected by the Indonesian Constitutional Court. Winoto explained: "It has already been decided by the Constitutional Courts that the period of ownership is tied to existing rules and the maximum foreign ownership/lease period remains 25 years, extendable for an additional 20 years, and then for a final extension of 25 years."

Winoto said BPN has no fundamental problem with those seeking to extend property ownership rights to foreigners, providing the rules and regulations are carefully drafted to avoid problems in the future.

REI submitted a draft of proposed changes in rules pertaining to foreign property ownership to the government in July. Included in those recommendations are proposals to allow am ownership period for foreigners of up to 70 years.

Advanced by REI, the new rules are intended to help stimulate the national property market.

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