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Foreigners Will Have the Lifelong ‘Right to Use’ Property, Says Agrarian Minister

Foreigners living in Indonesia will be able to secure the “Right to Use” property in the country for as long as they live under a newly planned state policy, according to a government official.

Minister for Agrarian Affairs and Spatial Planning Ferry Mursyidan Baldan revealed that his office had been tasked with drafting a new regulation on the matter.

“The regulation will include details on ownership periods, requirements, and rights and obligations of expatriates who will be granted the right to purchase and own property in Indonesia,” Ferry said in Jakarta last week.

He added, however, that foreigners would only be allowed to own luxury apartments; they are still prohibited from purchasing landed property or low-cost apartment units.

Foreigners also will be only entitled to “hak pakai,” or the Right of Use; not “hak milik,” the highest form of ownership in Indonesia, or Freehold. The Right of Use is permanent  and will not have to renewed every 25 years as specified in the current regulations.

“The state allows foreigners to own living spaces in Indonesia for as long as they live, and they’ll be able to trade the properties or pass them down to their children. [Ownership] is classified as Right of Use, though. It will not be Freehold,” Ferry said.

Freeholds are permitted for foreign embassies operating in the country, he added

The minister further said he disagreed with the proposal of a “zoning” regulation in the planned policy, which would allow foreign nationals to own property in certain areas of the country.

He pointed to the capital, saying foreigners would only be interesting in purchasing apartments in Kemang or the Central Business District areas of South Jakarta.

“Foreigners wouldn’t want to buy apartments in, say, Kebon Jeruk [West Jakarta] and other areas. It’s useless to limit the areas where they can purchase [a piece of property].”

The draft regulation will replace a 1996 government regulation on foreign ownership of properties in Indonesia, and is expected to be complete by the end of the year, Ferry added

Finance minister Bambang Brodjonegoro earlier said that the government would allow foreigners to own property in Indonesia, but they would be restricted to luxury apartments that cost at least Rp 5 billion ($375,000) per unit.

The decision was made after President Joko Widodo met with officials from property group Real Estate Indonesia (REI) last Tuesday.

Presidential spokesman Teten Masduki said Joko had approved the suggestion from REI officials to support the domestic property sector following the slowdown of Indonesia’s economy. The policy is also expected to bolster the confidence of developers in staying competitive in the regional market.

Property developers have welcomed the plan. Rudy Margono, president director of private developer Gapura Prima said the new policy could boost property growth by 20 percent.

Property observers like Ali Tranghanda, however, expressed concerns that the regulation would only trigger a property bubble if not handled carefully, pointing out the absence of an instrument to control land prices in Indonesia.

“I am concerned that if the market is fully open, we will have a property bubbles within five years,” he warned.

The Indonesian expatriate community, meanwhile, seems skeptical of the reported plan, with some saying the proposed Rp 5 billion benchmark was too high and others claiming the policy is no different from a changing lease scheme.

Indonesia’s habit of changing its regulations with every new administration is also a source of concern.

Of course, Indonesian netizens wasted no time in taking to social media to voice their disapproval.

“In the short run, economy gets a boost from new construction; in the long run, [price of] land in high-rise zoning [areas] skyrocket and the adjacent real estate will follow suit. Yes, most low-income earners will be further marginalized,” one opponent of the proposed policy commented on Facebook.

“Perhaps what [the government] means is legal ownership of property by foreigners… Foreigners have already purchased many plots of land in Bali,” tweeted another.

“If foreigners are allowed to own property in Indonesia, it will be no different from pawning off the nation’s sovereignty. Where will they send the locals to??” another commenter posted on Twitter.

Vice President Jusuf Kalla, however, defended the planned policy, saying last week: “There are a lot of foreigners working in Indonesia now… some have been working well, some have been developing businesses. It is normal for them to purchase, instead of continually leasing properties,” Kalla said.

Investment Coordinating Board (BKPM) head Franky Sibarani, meanwhile, said foreign purchases of properties should be encouraged in eight special economic zones, or KEK, currently under development in Indonesia.These include: Sei Mangkei in North Sumatra; Tanjung Api-Api, South Sumatra;  Tanjung Lesung, Banten; Mandalika in West Nusa Tenggara; Maloy Batuta Trans Kalimantan, East Kalimantan;  Palu, Central Sulawesi; Bitung  in North Sulaewesi; and Morotai, North Maluku.

“We fully support the policy, but all we ask is for it to apply to special economic zones, particularly those designated for tourism, in order to guarantee investment in those regions,” Franky said, as quoted by cnnindonesia.com.

Source: Jakarta Globe