Indonesian property developers should build under right-to-use to attract foreign buyers: housing developers assoc head

JAKARTA – Developers of residential apartments in Indonesia should build under the right-to-use category instead of right-to-build to attract more foreign buyers, Eddy Hussy, chairman of housing developers association Real Estate Indonesia told Salaam Gateway.

Current government regulations allow foreigners to own landed property and apartments under the right-to-use category. However, Indonesian property developers in general do not build residential apartments under this category as it is not popular among locals, who consider it to be of lower value than the right-to-build and right-to-own categories. 

“Latest regulations allow foreigners who have temporary stay licenses or visit visas to buy apartments under right-to-use for 80 years. The problem is, most apartments and high-rise developers still use the right-to-build category, which isn’t open to foreigners,” explained Hussy.

“Therefore we propose to the government that in future, all apartments should use the right-to-use category. The national land agency (BPN) is still evaluating this,” he said.

The latest change in regulations, announced late lastyear, have aligned the period of tenure—80 years—for both the right-to-use and right-to-build categories, putting the two on equal legal footing.

Hussy believes that making the switch to right-to-use will give foreign investors more trust in Indonesia as an open country for property investment.

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The next step would be to allow mortgages for foreigners, he said.

Currently, local banks will not sell mortgages for properties under the right-to-use title.

Hussy therefore suggests a change to allow properties under the right-to-use title to be used as collateral when purchasing a mortgage.

Foreign buyers are still required to pay 100 percent in cash for properties under the right-to-use title.

Hussy also suggests that foreign investment in the country would be boosted if non-resident foreigners were allowed to buy property in the country, and that as a bonus, they could be given five-year resident permits after the purchase. 

He added that all of these would be in line with President Joko Widodo’s aim of boosting foreign investments.  

In a bid to attract more foreign investments, following the relaxation of regulations on foreign ownership of property, in May this year the Indonesian government released details of a liberalization of the foreign ownership rules on investment across multiple sectors, ranging from 100 percent foreign ownership in toll roads to 49 percent in land transport.

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