Jakarta. The government is revising a regulation that will allow foreigners to obtain and trade property in Indonesia under the right-of-use category.

Possession of the property, which excludes landed houses, has no time limit and may be passed on to descendants as inheritance.

Land Affairs and Spatial Planning Minister Ferry Mursyidan Baldan said on Thursday that foreigners will shortly be able to purchase commercial apartments that cost at least Rp 5 billion ($375,000) in Indonesia.

“The state will allow foreign nationals to have apartments in Indonesia for their lifetime, and the apartments may be bequeathed to their descendants or resold,” Ferry said. “However, the status of these apartments will fall under the right-of-use category, not the right-of-ownership category.”

Pursuant to the 1960 Land Law, the right of use — known in Indonesian as hak pakai — over a property entitles the holder to use and obtain output that comes from the land in question.

The accompanying 1996 regulation specifies that possession of properties that fall under the right-of-use category lapses in 25 years, but possession can be extended for another 20 years or indefinitely for the land is still used for specific, legally defined purposes.

However, the land law also provides for the right of ownership — known in Indonesian as hak milik — that has no time limit but is applicable only to Indonesian citizens.

Ferry pointed out that foreigners cannot possess any property in Indonesia under current regulations. Once passed, he said, the revised regulation will open doors to foreigners to possess apartments legally.

“We will issue a government decree on foreign possession of property before the end of the year,” Ferry said.

Ferry said the government had no intention to restrict the location of apartments available for foreigners to possess in Indonesia.

“Foreigners normally prefer living in South Jakarta areas like Kemang or in the Sudirman Central Business District so it’s useless to restrict their purchase locations,” he said.

Separately, the executive director of Indonesia Property Watch, Ali Tranghanda, has urged the government to spell out the new regulation as clearly as possible. He warned that the floor for foreign-possessed properties must be above Rp 5 billion.

“Otherwise, foreigners will go on a shopping spree,” Ali said. “I am concerned we will be in a property bubble within five years if the market is too widely opened. Look at Singapore and China: bubbles developed after their governments allowed foreign ownership.”

Local developers welcome the government’s revision, saying that it would boost a property market flagging from a weakened national economy.

Iwan Sunito, chief executive officer of Crown Group, said the new policy would reorient local players who had so far focused on the domestic market. “With the new market for foreigners, developers will build to international standards,” he said on Wednesday.

Investor Daily

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