Indonesia Property

INDONESIA

Indonesia is the world largest island country with more than 17.000 islands at 1904.569 km2. it has estimated population of over 260 million people. It has abundant natural resources like oil, natural gas, tin, cooper and gold. Indonesia is one of the richest countries in the world when it comes to natural resources with one of the largest productive populations on earth being led by a democratic and proactive government. It receives the second highest amount of foreign investments in the world after China and it’s debt exposure compared to the National Budget is on the same level as Norway.. The country’s growth at 5% for 2016 – up from 4,8% in 2015, remains among the highest in large emerging market economies. The government has already started to implement reform to improve the investment climate and boost growth. those include expanding investment in public infrastructure, reducing layers of government regulations, and opening up new areas of the economy to private investment. The property sector shows more ! confidence. The government has cut the key of interest rate, given tax incentives to Indonesian, eased the restrictions on individual foreign ownership, increased the threshold for luxury property tax. Indonesia’s strong economy will likely trigger rising demand in Bali, causing prices to continue climbing. It is difficult to see what could stop the rise. There is no better place to invest right now. Domestic investors are jumping at the opportunities to absorb cheaper assets.

BALI ISLAND

Bali is one of the more than 17.000 islands in Indonesia, the wealthiest region. the island, home to about 4million people covers 5780km. For the last 30 years, Bali has been developed as one of the world’s premiere tourist destinations, receiving 2 million visitors a year. Bali economy registered a growth of 6,24% in 2016. Infrastructure is up, investment will also rise. There has been tremendous growth in land and property prices in all parts of Bali for 15 years , but now for the first time, in certain areas are experiencing a slow
down. In the areas like Seminyak and Sunset Road where land has reached the !2dizzying heights of 200,000 Euro/ 100 m2. The hefty price tag combined with things like height restrictions to whatever can be built is pushing interest to other, cheaper parts of the island and other islands around Bali such as Lombok, Flores and Sumba.

SUMBA ISLAND

Sumba is a remote Animist and Christian island in eastern Indonesia, one of the Lesser Sunda Islands, in the province of Nusa Tenggara Timur. It has an area of about 11.153 km2. So it’s roughly twice the size of Bali, with approximately 686.000 inhabitants in 2010. Sumba has only about one sixth of the population of Bali.! Sumba is home to one of the last megalithic cultures on earth. The locals live by the word of shamans, perform animal sacrifices and megalithic burials, and hold an annual festival, Pasola, in which opposing clans hurl spears at one another on horseback. The significance of Pasola is represented across the island in art and sculpture, and makes up the majority of prints on Sumba’s renowned as Ikat.

Infratructure and current utilities
The north coast road called antura road has been build across the island connecting along the coast line. Airport has been rebuild for bigger structure in Tambolaka Airport Southwest Sumba and plan to develop more into International airport in the future with direct flight from Jakarta, Australia, and Singapore. Sumba has 2 airports , Tambolaka Airport in Southwest and Waingapu Airport in East Sumba. It takes only 1 hour 20 minutes direct flight from Bali to Sumba with 3 airline
companies : Garuda, Wing Air and NAM Air.Sumba island has been chosen as The Iconic Island of 100% Renewable Energy by Hivos, The Dutch non-government organization who begin the project in 2009 to provide electricity using solar energy. Up till now, more than half of the island is electrify. Hivos with the government, NGO, Norwegian Embassy and The Asian Development Bank involved, plan to fully electrify the island using only renewable sources by 2025. Access to water is one of the challenge in Sumba, since the population can not afford to drill the ground to find fresh water. Water trucks supply some residents in town, while many villagers still have to walk in kilometers to find water.

Property Investment
Sumba is famous with its pristine beaches, world class surfing and offer diverse religion with special culture. Beachfront land price is still affordable in Sumba compare to other islands around. West and Southwest Sumba are the main tourism destination region. In the past years, price of land was increasing by 100% each year. The unique island is referred to as the rising start of Indonesia. International and domestic hotel chain are purchasing beach front land mostly in West and Southwest Sumba. Beach front land in Sumba are sold by hectare ( 10.000m2 ), mostly in freehold and cash payment in exchange with the certificate. In order to certify a new land, it is lengthy and complicate process that should be undertaken only by knowledgeable people to avoid any disappointment. Few years ago only, one could only buy a land with barter ( buffalo, goats, horse and pigs ). With an influx of foreigners, and investors coming to do business in Sumba, money rapidly replaced cattle, but this shows that it’s the beginning of a land trading era, with skyrocketing prices. These last 3 years, Sumba clearly revealed itself as a gem for land, business investors. Sumba is an ideal location for tourism and business investments. Many investors from Asia, Europe, and US are developing hotels and resort. The famous resort, Nihiwatu owned by American entrepreneur ,won The Best Design Award at PURE 2015 as well as Destination Hotel Resort of the Year from Asia Spa Magazine 2015. Conde-Nast Traveler- The world’s Best Hotels Gold List 2016. The room rate range between 750 USD to 14.000 USD per night based on the season and room categories.

Property Ownership in Indonesia
Expatriate business people in Indonesia have rightful concern regarding land use and ownership rights for business purposes. Act No. 5 of 1960 regulates the umbrella law regarding rights over land ownership. The law covers some rights – mostly those to Indonesian citizens – namely rights of ownership (hak milik), building rights on land (hak guna bangunan), cultivation rights on land (hak guna usaha) and rights of use (hak pakai). With the emergence of foreign investment and business in Indonesia, many foreign investors need buildings or land for their company. A foreign investor who wants to run their business in Indonesia can obtain building/office or land under these
following rights:
• Building Rights on Land (Hak Guna Bangunan)
The right to build and possess a structure on land owned by others: The duration of right for the building is maximally 30 years, extendible for 20 years (article 30 Act No. by 5/1960). This right can be transferred to other persons selling and inheriting, who also can secure a loan, as a Hypothec Right. Those who may obtain right-to-build deeds are Indonesian citizens and legal entities (such as a PT/limited liability company) established under Indonesian law and domiciled in Indonesia, either for 100 percent foreign-owned, joint venture or 100 percent Indonesian-owned companies. Foreign investors who desire to establish their business in Indonesia can have their building/office under a “rights to build” deed for a stipulated period.
• Cultivation Right on Land (Hak Guna Usaha)
This is a right to cultivate on state land for agriculture and farming enterprises. The duration is maximally 25 years, extendable for 35 years, and should be registered at the Land Register at the National Land Agency (Badan Pertanahan Nasional/BPN). As in Right to Build, Cultivation Rights can secure a loan by delivering the certificate of Cultivation Rights to the lender. Indonesian citizens can own these rights, as can legal entities (such as PT/limited liability companies) established under Indonesian law and domiciled in Indonesia, either for 100 percent foreign-owned, joint venture or 100 percent Indonesianowned companies.
• Right of Use (Hak Pakai)
This is the right to use and/or harvest from land directly owned by the state (rendered by authorized official government deed), or private land (by agreement with the owner of the land). This may be applied to land for use as a building site or for agricultural purposes. The transfer of this right must have local government authorization.
• Right of Lease of Building (Hak Sewa)
A person or Indonesian legal entity has rights to lease another’s land. This right belongs to Indonesian citizens, foreigners, and legal entities (such as PT/limited liability companies) established under Indonesian law and domiciled in Indonesia or the representative office from a foreign legal entity. The leasee and the leaser can make an agreement to arrange it.
• Hak Guna Bangunan vs. Hak Milik
Hak Guna Bangunan is only the right to use a building for a fixed period of time, which then has to be extended. The owner of Hak Guna Bangunan land is the Indonesian government. Meanwhile, only with Hak Milik do you actually own the land or the building. Hak Milik does need to be extended.
Purchasing Properties (Strata Title, Convertible Lease Agreement or indirect purchase)
By Indonesian law, a foreigner cannot own land in Indonesia but purchasing apartments or office space is possible through a strata title deed. The 1996 regulation (No. 41/1996) states that an expatriate who resides in Indonesia or visits the country regularly for business purposes can purchase a house, apartment or condominium, as long as it is not a government subsidized development. The title is only for right of use. In reality, the regulation No. 41/1996 is still somewhat unclear and no foreigner has actually been able to receive a strata title as a certificate of ownership. Despite this unclear legal ownership, foreigners sign a
convertible lease agreement
with property management companies or indirectly by using the names of an Indonesian citizen whom they have a separate agreement with. Convertible Lease Agreement One manner for a foreigner to proceed with property purchases, despite legal ambiguities, is to sign a Convertible Lease Agreement to purchase an apartment. Under the forgoing agreement, the foreigner may purchase the apartment, but the title is still held in the name of the developer or property management firm. This lease agreement is for a definite period. The Convertible Lease Agreement states that, if and when the prevailing laws and regulations permit, the lessee becomes the legal owner of the apartment/strata title unit. Both the lesser and the lessee will be obligated to sign a deed of sale and purchase and the title will be transferred to the foreign owner. If you are interested in purchasing a condominium through this type of agreement, investigate the property management company thoroughly. In the current economic downturn, many developers are bearing serious economic pressures and construction costs on many properties that have been delayed or canceled. Consult with a reputable lawyer to ensure that all legal implications are thoroughly covered.
Indirect Ownership
Another way to purchase a condo is in the name of an Indonesian citizen. But the person must be someone you really trust. The person would be the legal owner of the property according to the law.
Land Market Price Comparison
Land price comparison on beach front land near city and airport in Bali, Lombok , Flores and Sumba by USD/m2 in 2017 :
Bali Island 2.000 $/m2.
Lombok Island 155 $/ m2
Flores Island 75 $/ m2
Sumba Island 23 $/m2.