Bisnis, JAKARTA — In the wake of the COVID-19 pandemic, Bali is becoming a tourist destination with the most rapid recovery. This has boosted the property market in Bali, driven by demand from both Indonesians and foreigners.
The government has opened the door for foreigners to easily own property in Indonesia. Until now, foreigners were only allowed to own residences that were built on land with leasehold rights and were required to have a Permanent Stay Permit Card (KITAP) and a Limited Stay Permit Card (KITAS).
However, foreigners can now residentials by simply attaching immigration documents such as visas, passports, or residency permits. Foreigners are granted ownership rights over condominium units (apartments) built on land other than leasehold land, as previously regulated. These apartments need to be built on land with right to build (HGB) in Special Economic Zones (SEZs), free trade and free port zones, industrial zones, and other economic zones.
The rules regarding foreign ownership of residences are regulated in Law No. 6 of 2023 concerning the Determination of Government Regulation In Lieu of Law Number 2 of 2022 concerning Job Creation, Government Regulation Number 18 of 2021 concerning Management Rights, Land Rights, Condominium Units, and Land Registration, and Agrarian Affairs and Spatial Planning Minister/National Land Agency Head Regulation Number 18 of 2021 concerning Procedures for Determining Management Rights and Land Rights.
Other regulations that have been issued include Agrarian Affairs Minister/National Land Agency Head Decree No. 1241/SK-HK.02/IX/2022 concerning Acquisition and Prices of Residential Homes/Residences for Foreigners. Previous policies regarding foreign residences were regulated in Government Regulation No. 103 of 2015 concerning the Ownership of Houses or Residences by Foreigners Domiciled in Indonesia and Agrarian Affairs and Spatial Planning Minister/National Land Agency Head Regulation Number 29 of 2016 concerning Procedures for Granting, Releasing, or Transferring Rights to Ownership of Houses or Residences by Foreigners Domiciled in Indonesia.
Foreigners who can own landed houses are granted leasehold rights with a total duration of 80 years including granting, extensions, and renewals. The luxury house category referred to is in accordance with the provisions of laws and regulations.
Furthermore, foreigners are allowed to own one land plot per person/family, with land area covering at most 2,000 square meters. However, they can be granted more than one land plot with an area larger than 2,000 square meters with ministerial permission.
In the context of foreign ownership, apartments as regarded as commercial residentials built on leasehold land or land with state rights, HPL land, or ownership rights.
The government also sets a minimum price limit for landed houses ranging from IDR1 billion to IDR5 billion, and from IDR1 billion to IDR3 billion apartments. These price limits have been lowered compared to before the Omnibus Law on Job Creation, where the price ranges were IDR1 billion to IDR10 billion for landed houses and IDR750 million to IDR3 billion for apartments.
Johannes Weissenbaeck, founder and CEO of Oxo Group Indonesia, believes that relaxing property ownership rules for foreigners is still very difficult to implement in Bali. According to him, the promotion of foreign properties has not been widespread in Bali.
"The regulations in Indonesia are complicated because regulations change rapidly and are interpreted differently, coupled with insufficient socialization. Foreigners and locals, including notaries and local governments, are not very familiar with the new rules. These notaries and local governments are also afraid to implement them because there is little socialization of the regulations," he told Bisnis on Tuesday (2/4/2024).
Ten years ago, foreigners who bought property in Bali used nominees or borrowed names under the names of Indonesian citizens, but this method was too risky. Currently, foreign property ownership in Bali is dominated by multinational companies using HGB status.
"Despite Bali’s teeming potential, regulations on foreign property are difficult to apply due to lack of communication, unlike in Jakarta where they are easily applied," he said.
Regardless, Johannes appreciates the government's policy of only allowing land to be owned by its citizens, which he deems to demonstrate nationalism and prioritizes Indonesian citizens.
BALI’S PROPERTY PROSPECTS
Johannes assesses that the property business market on the island of Bali still has promising prospects, despite a change in trends before and after the pandemic.
Before the COVID-19 pandemic, the majority of the property market in Bali was dominated by consumers seeking second homes as holiday houses, mostly from foreigners and a small portion from domestic buyers.
During the pandemic, when traveling abroad was restricted, Indonesians, especially from Jakarta and Surabaya, targeted the property market in Bali. This shift in the market after the pandemic from a holiday market to an investment market occurred because Bali's rapid recovery made property sector yields better than stock markets and financial investment markets in other countries.
"For example, in Europe, both before and after COVID-19, the yield offered was almost 0 percent, so people pay to deposit money in banks, yielding in zero interest. Meanwhile in Bali, investment yields can reach 10 percent. This is what encourages people to start looking at property investments in Bali," he said.
He believes that this market change represents significant potential, hence Oxo focuses on developing boutique lifestyle concept properties.
Oxo Group Indonesia is a property development and management company that has been present in Bali since early 2015. The company has developed and owns about 30 properties in Bali worth IDR700 billion, consisting of private residences, villas, townhouses, co-working studios, and resorts. The company also owns a 20-meter cruise ship in Komodo National Park.
"The products we offer are not just for investment or lifestyle; unit owners can occupy their properties when they come to Bali and then we help rent them out when they are not occupied," he said.
So far, 80 percent of Oxo's products have been dominated by foreign buyers from Australia, Singapore, and others, while 20 percent come from Indonesian citizens. However, this year, Oxo will start targeting for 80 percent of Indonesians and 20 percent foreign investors.
The company deems that Indonesia's large population of over 270 million people has high purchasing power in buying quality properties.
"The local market is growing larger than those in Medan, Surabaya, and Jakarta. This is a huge potential for tapping into the local market," Johannes said.
Oxo is committed to promoting sustainable lifestyles, which are also needed and sought after by both foreign and domestic investors. All properties built by Oxo are equipped with solar panels, rainwater harvesting areas, water treatment, osmosis water filters, and recycled or recyclable raw materials.
"We have even implemented zero waste in every property project we undertake, and we have been doing all of this since our inception. Of course, we also have green building certification from GBCI and are in the process of obtaining international B Corp certification," he said.
Meanwhile, head of strategic studies at the Indonesian Real Estate’s (REI) central board Ignesjz Kemalawarta admits that there are difficulties in implementing relaxation of regulations for the ease of foreign property ownership.
"The local governments in Bali still find it difficult to implement the purchase of residential properties without using KITAS/KITAP. Only Batam has been able to implement foreigners buying properties without KITAS/KITAP. Despite its great potential, Bali still has many nominees," he told Bisnis last month (27/3/2024).
According to Ignesjz, regulatory arrangements that facilitate foreigners owning residences in Indonesia still need support in the form of coordination between central and local governments. He added that there are still differing interpretations of regulations, especially at the local government level, which hinders housing transactions for foreign nationals.
Head of research at Rumah123, Marisa Jaya, said that over the past decade, policies on foreign property ownership in Indonesia have become increasingly flexible, opening up new opportunities for the property industry to attract foreign market interest.
Throughout 2023, there were 10 most sought-after regions for foreign property seekers, namely South Jakarta; Badung, Bali; Tangerang, Banten; Bandung; West Jakarta; Batam; North Jakarta; Denpasar; Central Jakarta; and Surabaya.
The demand for properties by foreigners has surged, especially in Badung, Bali by 92.1 percent and Denpasar by 81.3 percent compared to 2022. Badung is also a favorite destination for foreign tourists. The popularity of this region is also boosted by its location as the gateway for tourists through Ngurah Rai International Airport and the abundance of commercial and tourism area developments, digital nomad trends, and work from anywhere (WFA) trends.
Read more: Catalyzing Positive Trends in Foreign Tourist Arrivals
"Growth of foreigners’ demand in properties in 2023 has seen rapid development compared to 2022. The potential for the foreign market is expected to further accelerate growth and advancement of this industry in 2024," said Marisa.
Landed houses and apartments are property types most sought after by foreigners in 2023, each encompassing 6.7 percent to 21.8 percent and 7 percent to 25 percent of foreign interest, respectively.