The Complete Guide to Investing In Indonesia Property
INDONESIA PROPERTY INVESTMENT GUIDE
You probably agree with the fact that real estate properties are the kind of assets that never disappear or lose their value.
If you want to invest something that will generate income for a long time, then investing your money in a viable property market is the best thing you can do.
But, this doesn’t mean that you can jump right into it.
While it can assure financial stability for very many years to come, an investment in the real estate market must be done after acquiring sufficient information and making a good plan of action, in order to succeed.
So, this is why this present investment guide was created.
Specially composed to serve investors that are interested in the domain of real estate in Indonesia, the sections of this guide will turn you into a powerful and informed investor that knows what this process is all about.
WHY INVEST IN INDONESIA PROPERTY?
Even though not very many people know it and are aware of the opportunities it offers, Indonesia is one of the most populated countries in Southeast Asia.
This means that there are a lot of people looking for homes as we speak.
- It enjoys one of the highest economic growth rates in the region
In the past decade, Indonesia focused a lot on its manufacturing industry, infrastructure, and services sector, which boosted the country’s economy.
Thus, it managed to gain an increase of 5%, which is the largest percentage of growth in comparison with the growth recorded by other countries in the same area.
- Even though it provides a great environment for property investments, this aspect is not that well known
It is true that the great economic growth stimulated property investments in the country, but the phenomenon is taking place at a much smaller rate than in neighboring countries.
This happens because many investors are not aware of the possibilities this country can offer.
So, if you choose to invest in Indonesia property market, you’ll be among the first that will tap into the advantages of making such an investment.
The country’s economy will continue to improve and you’ll gain a lot of benefits this way, without a doubt.
- All eyes will soon be on Indonesia
Many real estate markets in the Southeast Asia are already supersaturated and already have prices that are out of reach for most investors.
So, still in development, Indonesia will soon capture the attention of investors that will look for better opportunities.
A great investment is made when purchase prices are low and future prospects are high, which is exactly what Indonesia is offering at the moment.
You just have to seize this opportunity and turn it in your favor.
- It is a safe investment on a long-term
Due to its high population densities in cities, Indonesia will attract a wide variety of companies in the near future, which will want to take advantage of this aspect and reach a high number of clients in short term.
In other words, the local consumer market and infrastructure help the relocation of these companies, which means both more workforce drawn in the area and a fruitful economy.
CAN FOREIGNERS INVEST IN INDONESIA REAL ESTATE?
At the moment, foreign investors cannot be the owners of freehold properties in Indonesia at the moment.
So they cannot purchase these properties in their name. Of course, there are high chances that the laws will change and things will become more permissive in this area.
Before getting worried that you won’t be able to invest in Indonesia, it is worth knowing that you can do it, even if the laws will not allow you to be the rightful owner of a property.
So, if the freehold property titles or SHM are reserved for Indonesian citizens only, the right-to-use property titles, which are mainly leaseholds, known as SHP, can also be provided to foreign investors.
At first, a leasehold will be released for 25 years, with the possibility to extend the lease for an additional 50 years. This means that you’ll be able to get a lease for a total of 75 years.
Things were quite different before 2016 when foreign investors were able to extend their lease for only 25 years, which means a total of 50 years.
So, slowly but surely, Indonesia is making changes and heading toward a better environment for foreign investments.
Also, in theory, the current laws allow foreigners to obtain strata titles for condominiums, but there is no evidence that this law was put in practice at the moment.
REASONS FOR A FOREIGNER TO INVEST IN INDONESIA
- Doing business gets easier every year
Indonesia is evolving considerably from one year to another, so, as time passes, it becomes easier and easier to do business here.
Entrepreneurs noticed this, helping the country jump from the 128th position to the 91st position in just 4 years, in the statistics representing the Ease of Doing Business.
It is also easier to establish a business here, to pay taxes, get financial services, do trade across the border, and so on
- Foreign investors started having access to more business classifications
In Indonesia, a foreign investor can own only a part of a company, how big this part is being determined by the type of business in which a foreigner wishes to invest.
But, in recent times, this situation improved as more business classifications were added to the list, opening new doors to expat investors that wanted to do business in Indonesia.
- A foreigner can own land in Indonesia
Starting with 2015, when a new law emerged, foreigners can own land in Indonesia if they meet a few criteria.
It is also worth mentioning that, in order to get the desired land, an investor must obtain a permit first, which will determine the type of activity that will be unrolled on that land.
Thus, there are 3 different permits, the Right to Build, the Right of Cultivation, and the Right to Use. According to the plans for your future land in Indonesia, you need to obtain one of these permits.
In order to obtain the Right to Use, permit, you need to fulfill one of the following requirements:
- You have to own a company, regardless if it is local or foreign;
- Or to be an individual with a valid stay and work permit in Indonesia.
- Both bureaucracy and corruption are going down in Indonesia
Even though corruption created a lot of problems in Indonesia a few decades ago, things are definitely improving in present days.
A Corruption Eradication Commission was created in Indonesia, which tracks down corruption, making sure that the economy of the country becomes cleaner.
There are other countries in the area that have the same problems, Indonesia being the only one that shows steady improvements in this matter.
- The middle class is growing the fastest in Indonesia
If we are to look at the countries that have the fastest growing middle-class, Indonesia occupies the top positions.
What does this mean? It means that investors will have a larger class to target when it comes to potential clients.
In other words, there will be more people in Indonesia that will have a great purchasing power and more sophisticated tasted, which is great news for investors.
With an average income of $3,600 or even more, the members of this class will want better residences.
- The population is on the rise
Everything is growing in Indonesia, including its population.
At the moment. Indonesia already reached the 4th position on the list of countries with the biggest population. But even so, things are not going to stop here.
It is estimated that the population of Indonesia will grow to 3 million people every year.
So, by 2020, Indonesia will have a population of 272 million. All these people will need a place to stay, which will definitely make the real estate domain flourish in the country for the following years.
Also, considering the fact that, at the moment, about half of Indonesia’s population is under the age of 2, the economy of the country will benefit from having a young workforce in the future.
- More and more people are moving to urban areas
There are much more opportunities in the cities, where living standards are better and jobs are more available.
An increasingly higher number of Indonesians are starting to understand this and they are started to move to the cities.
This means more people ready to pay for services, purchase more items, and find a new place to live.
So, besides infrastructure, the real estate market will also have to develop, so that it will start meeting the increasing demand.
- The country’s GDP is growing and can end up being the biggest in its region
The GDP of Indonesia is already improving and considering that it is the most populous country in Southeast Asia, it has very high changes to considerably grow in the future as well.
So, under these circumstances, Indonesia can easily become the most prosperous country in this particular region.
- Competition is still at low levels
Because not very many know about the potential of Indonesia’s property market, plus there are several barriers that may discourage some, so competition is still very low.
So, with a bit of patience and willingness to succeed in Indonesia, you can turn all these into advantages, as you will enjoy less competition as an investor in Indonesia.
You could buy any property you like, such as a Batam house, and expand your business according to your plans.
HOW MUCH ARE PROPERTY TAXES IN INDONESIA?
All the advantages of investing in Indonesia property comes with one disadvantage, and that is the fact that property taxes here are rather high.
If you want to sell a property in Indonesia, like a Batam apartment, as a seller you will have to pay a 2.5% transfer tax that is calculated in accordance with the value of the sold property.
When buying a property in Indonesia, 1% of the property’s value will represent the land acquisition duty, which will have to be paid by the buyer.
In case you are interested in luxury properties, like houses and apartments, do know that you will have to pay a 20% tax if you plan on selling such properties.
If you have a property rented in Indonesia but you do not live in the country, you will have to pay a 20% tax on your rental income.
In case of Indonesia’s residents, this task is lower, of only 10%.
Besides this, there is an annual tax for properties as well, which is calculated in accordance with the thresholds set by the government.
Thus, you will have to pay 0.1% for properties with values ranging from IDR200 million to IDR2 billion, 0.2% for properties ranging from IDR2 billion and IDR10 billion, and 0.3% for more than IDR10 billion.
IS BUYING PROPERTY IN INDONESIA SAFE?
If you are going to respect the local regulations and pay all the taxes, you should have no problems with your properties and their development in Indonesia.
The property buying process here is rather straightforward when all conditions are met. Still, if you come across acts of corruptions, do not make their game and do not encourage it.
Remember that there is an entity in the country to help you out in these cases.
Also, do have a bit of patience with the local bureaucracy.
Things have improved in the past years, but they may still not work as smooth as they should.
IS INDONESIA PROPERTY A GOOD INVESTMENT?
Indonesia currently represents a great place to invest in at the moment because the growing population will drive the demand for new residences up.
So, if you have sufficient capital to invest, going for the property market in Indonesia is a great investment.
Although foreigners can’t actually own property in Indonesia at the moment, there are some ways to invest in the country.
Also, things will definitely change when it comes to buying properties in Indonesia as a foreign investor, so it is worth making all the preparations for the process.
How can you tell if things are going to change?
First of all, it took only 3 years for foreign investors to gain ownership in a proportion of 100% of various businesses, something that wasn’t possible until recent times.
Also, the maximum term for leases doubled, so that’s a clear indicator that the government in Indonesia is working out these aspects and changing the existent regulations.
WHY INVEST IN INDONESIA NOW?
- Things are moving in the right direction
The local economy, GDP, the eradication of bureaucracy and corruption, the increase of urban areas, and improvement of the infrastructure, they will all create the ideal environment for investments in the real estate market.
- Cities will continue to develop
A bigger number of Indonesians are starting to appreciate life in the cities, so urban areas like Batam will continue to grow and house more people in the near future.
- The middle class is becoming larger
The middle class is starting to acquire significant proportions in Indonesia, due to a large number of young people that are working and earning decent wages.
It is this particular social class that will drive the economy us, with their increased demand for products, services, and new housing.
PROJECTS TO INVEST IN INDONESIA
OXLEY CONVENTION CITY
Oxley Convention City is a flagship development covering a land area of approximately 20,000 sqm. Located at the heart of Batam’s thriving financial district, the iconic development will be Batam’s first integrated convention centre and office tower. The entire development comprises an office tower with 320 office units, a hotel of 520 rooms, a retail and food & beverage (F&B) avenue with 130 units, and three towers of luxurious residences consisting of 1635 residential apartments.
Phase 1 of Oxley Convention City will consist of 624 residential apartments (Residential Tower A) and 66 retail and F&B units.
Oxley Residences, the residential development of Oxley Convention City, offers well thought out homes with high ceilings and balconies that take in the scenic views outside. With a choice of homes suitable for both singletons and growing families, these residences easily meet the demands for an elevated urban lifestyle.
Three 32-storey towers with a total of 1,635 residences. Efficient studios from 25 sq m – perfect for young urbanites. Compact 1-bedroom units from 39 sq m – starter homes for young professionals and couples Spacious 2- to 3-bedroom units from 53 sq m – ample spaces for families to grow
With a host of private facilities including BBQ pits, yoga room, swimming pools, sauna, playground, multi-purpose function room and a well-equipped gym
WHY INVEST IN OXLEY CONVENTION CITY
7 business towers merged in 1
It is the first mixed-development in Batam which has an integrated ecosystem. It was comprised with three 32-storey residential towers, 20-storey hotel, 29-storey office, a convention centre, 3-storey podium, and 130 retail units. It was designed to cater not just all the needs of its residents but the growing demand for residential and venue for large gatherings.
It wants to introduce you to a grand urban living where you can balance both living and working. On this place, things are made easier and accessible for you, because you are just floors away from shopping malls and high-class restaurants.
Aside from high-class restaurants, the residents can soak down to its swimming pool facility. They can also enjoy and access other modern facilities such as gym, clubhouse, and more.