Untapped opportunities in Indonesia’s real estate market
Average land prices in Indonesia have been growing across the nation. Prices continue to be highest in the capital city, Jakarta, which is the economic center of Indonesia. The average land price in industrial areas in Jakarta reached 5.75 million Indonesian rupiah per square meter, while the landed residential homes’ prices were almost three times higher, reaching 15 million Indonesian rupiah per square meter. In August 2019, President Joko Widodo announced that Indonesia will move its capital city to East Kalimantan in the next few years. Since then, the property market in Borneo Island, where East Kalimantan is located, has become more attractive than before.The real estate sector in Indonesia is one of the few sectors that were not greatly affected by the COVID-19 crisis. It is the only sector in the country that still experience growth in 2020. Indonesia’s biggest real estate companies such as PT Lippo Karawaci, PT Bumi Serpong Damai, and PT Ciputra Development still had rising sales in the residential houses and apartments sectors. This indicates that the demand for these properties in Indonesia is still high, even during the crisis. However, its property supplies are still relatively low. There is still much room for further developments to fulfill the demand for residential and commercial real estate.
Indonesia’s efforts to expand the sector for locals and foreigners
To meet the rising property demand and lower its housing backlog, the Indonesian government has introduced several measures to expand the sector, such as decreasing key interest rates, raising the housing financing liquidity facility’s rate, providing tax incentives to Indonesian real estate investment trusts, and increasing the loan-to-value ratios. The government also increased the price threshold for luxury property taxes, to encourage home buying in Indonesia. After the COVID-19 crisis hit the country, however, home rental rates among Indonesian households, especially in big cities, has been increasing.Indonesia has restrictions on foreign real estate property ownership, and only citizens can own property and land in the country. However, purchasing real estate is possible through a strata title agreement. Owning an Indonesian legal entity such as limited liability companies allows foreigners to have the right to build and the right to use the properties for up to 60 years.
