Investing in real estate has consistently proven to be profitable, and Indonesia is no different. Due to its expanding economy and rising rate of urbanization, Indonesia’s real estate market presents a wide range of investment opportunities. An extensive summary of real estate investing in Indonesia will be given in this post, along with information on the best places to invest, the legal & taxation landscape. In recent years, the Indonesian real estate market has grown significantly.
Overview of Real Estate Market in Indonesia
Indonesia’s real estate market in 2024 is expected to reach $64.78 billion with a projected CAGR (Compound Annual Growth Rate) of 5.82% until 2029 . The residential sector is thriving, driven by a rising middle class, government incentives, and demand for landed houses. High-quality office spaces and malls should also remain strong. While competition in warehouses might rise, the overall outlook is positive.
Overall the Indonesian real estate market in 2024 appears to be on track for moderate growth, especially with new President coming.That’s why we are gonna dive in this article on the Indonesian real estate market for the tips, regulations, and price to help inform you.
Factors Influencing Property Prices in Indonesia
As in any other countries in the world, the factors influencing property prices in Indonesia follow the same trends/theories which are:
- Property Characteristics: Physical qualities like size, number of floors, and age of the property play a role as well as the the concept or design of the property.
- Location: Proximity to desirable areas such as city centers, business districts, or good schools significantly impacts prices. Infrastructure, such as access to public transportation and essential amenities, also plays a crucial role. Even within a favorable location, factors like noise levels or scenic views can influence property prices.
- Market Conditions: Macroeconomic factors like GDP growth, interest rates, and inflation play crucial roles in determining prices. Government policies such as tax breaks or infrastructure investments also have an impact on pricing. Supply and demand dynamics in a specific area influence price determination as well. Furthermore, buyer preferences for prestige or specific lifestyles can also affect prices within certain segments.
In this article we will highlight more on the market conditions, especially in the big city such as Jakarta, Bali, and Lombok.
Buying Property in Indonesia as a Foreigner
As a member of G-20 group, as well as becoming one of major development countries in the world. Indonesia has interesting values in the eyes of foreign invesment. Such as in real estate invesment in Indonesia for foreigners.
For foreginers to obtain, buy a property in Indonesia to start their real estate investment is quite challenging as we say. The number one rule here is Foreigners cannot directly own freehold property, either it’s land or villa (Hak Milik). One thing for sure, we will never recommend you to buy property with nominee agreement.
Ironing out legal agreements is just one hurdle to overcome. Financing options for foreigners can also be a challenge. But fear not! We’ve written a comprehensive guide to financing your first property purchase in Bali.
Going forward from that number one rule, there are some exceptions so foreign investment can still put their interest in Indonesian real estate market. Such as:
- Leasehold (Hak Pakai): This grants long-term use rights (typically 25 years with a possibility of extension) and is the most common option.
- Right to Build (Hak Guna Bangunan): This offers ownership of buildings on leasehold land, often for 30 years with extensions.
- Investment through a PT PMA: Setting up a foreign-owned company allows property ownership but involves additional procedures.
But as of April 12, 2024, foreigners can now buy property with just a passport in certain circumstances, with minimum property value requirements and land size limitations. However, there is a minimum housing price that foreigners must meet to make a purchase.
According to the Decree of the Minister of Agrarian Affairs and Spatial Planning/Head of the National Land Agency Number 1241/SK-HK.02/IX/2022 regarding the Acquisition of Residential/Residential House Prices for Foreigners, the minimum housing price varies depending on the region. Here is the information:
| Regions/Provinces | Minimum Prices (IDR) | Minimum Prices (USD) |
|---|---|---|
| Jakarta, Banten, West Java, Central Java, East Java, the Special Region of Yogyakarta, and Bali | IDR 5 Billion | USD$300,000 |
| West Nusa Tenggara | IDR 3 Billion | USD$185,000 |
| North Sumatra, East Kalimantan, South Sulawesi, and Riau Archipelago | IDR 2 Billion | USD$125,000 |
| Other Regions/Provinces | IDR 1 Billion | USD$62,000 |
For Flats/Apartments:
| Regions/Provinces | Minimum Prices (IDR) | Minimum Prices (USD) |
|---|---|---|
| Jakarta | IDR 3 Billion | USD$185,000 |
| Banten, West Java, Central Java, East Java, Special Region of Yogyakarta, Bali | IDR 2 Billion | USD$125,000 |
| Other Regions/Provinces | IDR 1 Billion | USD$62,000 |
Please note that this regulation is just aiming to make Foreigners easy to buy / invest in Indonesian real estate market. With just a tourist visa, foreginers can purchase a property. But still the property is “not owned by you (foreginer)“, the number one rule still applies which is foreginers can not own land/property in freehold status, only in leasehold.
Property Taxation in Indonesia
If you’re a property owner in Bali, it’s essential to understand the taxes you may be required to pay. From property tax to income tax, there are a few taxes you should know about to ensure you comply with all the regulations and avoid any penalties.
- Land and Building Tax (Pajak Bumi dan Bangunan – PBB): This annual tax applies to all property owners, including foreigners. Rates are typically low, around 0.1% to 0.5% of the government-determined property value.
- Rental Income Tax: If you rent out your property, you’ll be taxed on the rental income. Rates vary depending on your residency status (10% for residents, 20% for non-residents).
- Transfer Taxes: When buying property, there’s a Land and Building Transfer Duty (paid by the buyer, around 5% of the property value or assessed value, whichever is higher). Sellers also pay income tax on the sale.
- Luxury Sales Tax or PPnBM is essentially a tax on high-end goods, encompassing luxury properties such as high-end villas and apartments. This tax is based on the transaction value of the property, which includes the purchase price and associated costs. It applies to both new luxury properties bought from developers and the transfer of ownership of second-hand luxury properties. Typically, the buyer is responsible for paying this tax, although in some cases, the seller may share the responsibility. In Bali, the PPnBM rate is usually around 5%, although it can vary depending on the type and value of the luxury property.
- PPN (Pajak Pertambahan Nilai), or Value Added Tax (VAT) in English, is a tax applied to goods and services during their production and distribution. In Bali’s property context, PPN is imposed on the sale of newly constructed properties like houses, apartments, and commercial buildings. The calculation of PPN is based on the sales price, encompassing the building cost and additional fees such as administration or notary fees. The current PPN rate in Bali is set at 10% of the property’s selling price.
Recommended Areas for Foreign Property Investment
The government has put in place a number of initiatives and incentives to promote the construction of affordable housing projects after realizing this need. Indonesia offers a plethora of options for real estate investors, particularly in sunrise properties. An environment that is conducive to real estate investment is created by the nation’s rapid economic growth and rising urbanization. Particularly in big cities like Jakarta, Surabaya, and Bandung, there is a strong demand for residential properties.
Real Estate in Jakarta
With the development of the new capital city and the official revocation of Jakarta’s status as the capital city in February 2024, Jakarta remains an interesting destination for foreign property investment.
Let’s say Jakarta will be like Shanghai to China. Jakarta will still be an economic hub city. The ongoing development of Jakarta’s Light Rail Transit (LRT) system and other infrastructure projects is set to enhance connectivity within the city. This improvement in transportation infrastructure not only facilitates easier commutes but also has the potential to increase property values in areas with upgraded access.
Moreover, Jakarta’s strategic location as a gateway to Southeast Asia’s thriving economies positions it favorably to attract multinational corporations and investment. This strategic advantage could further stimulate demand for real estate in the city, making it an attractive destination for property investors looking to capitalize on Southeast Asia’s economic growth.
Real Estate Investment in Lombok
Lombok, Bali’s enchanting neighbor, is rapidly emerging as a sought-after destination for property investment. Its captivating natural beauty, strategic location, and government initiatives are fueling this exciting trend.
The development of Kuta Mandalika as a Special Economic Zone (SEZ) and host of the prestigious MotoGP Championship has undoubtedly cast a spotlight on Lombok’s real estate market.
However, what truly sets Lombok apart is its natural beauty. The breathtaking landscapes of Lombok rival those of Bali, yet it remains relatively untouched by mass tourism, making it an ideal destination for property investment, especially in rental properties.
Picture owning beachfront real estate with unobstructed vistas of pristine white-sand beaches and the sparkling ocean. Lombok presents opportunities for acquiring untouched land where you can create your dream villa or resort, surrounded by the island’s stunning natural surroundings.
Real Estate Investment in Bali
Bali, the place we all love. A well-established tourism industry, attracting millions of visitors annually. This translates to a consistent demand for rental properties, offering potential for strong rental yields.
In addition, Bali has become a popular second-home choice for foreigners due to its stunning natural beauty, vibrant culture, and relaxed lifestyle. Over the years, there has been a notable increase in the number of foreigners purchasing houses in Bali for investment purposes, retirement, or holiday homes. The diverse range of properties available, from beachfront villas to serene retreats in the countryside, caters to various preferences and budgets. Moreover, Bali’s robust tourism industry and growing economy make it an attractive destination for property investment.
Different areas offer unique advantages. Seminyak and Canggu cater to a trendy, upscale crowd, while Ubud offers a cultural immersion experience. Sanur is known for its family-friendly atmosphere, and Nusa Dua is a haven for luxury resorts. For more information, you can contact us or browse all our properties for sale in Bali.
Real Estate Investment in Nusantara, Indonesia New Capital City
Indonesia’s ambitious plan to construct a new capital city, Nusantara, in East Kalimantan, has ignited substantial interest in real estate investment. The Indonesian government is enticing investors to Nusantara by offering tax breaks and other incentives.
Indonesia even release Golden Visa to attract foreign investors to invest. This can result in reduced costs and potentially higher returns for investors. Examples of incentives include lowered corporate income tax rates and tax breaks for specific development projects.
The development of Nusantara will involve significant infrastructure investment, creating a modern city with advanced facilities. This could lead to increased property values as the city matures. Being among the early investors in Nusantara offers the potential to capitalize on future growth. As the city develops, property values are likely to rise significantly compared to established areas.
Important Notice
As a real estate agency in Bali, we have extensive knowledge but due to the nature of the real estate invesment and Indonesian regulations that is always changing (dynamic) it is best to treat this article as a general overview and should not be considered exhaustive or as legal or tax advice. We strongly recommend seeking guidance from a qualified professional who can offer personalized advice tailored to your specific situation.
FAQs
The real estate market in Indonesia is currently experiencing steady growth, with increasing demand for both residential and commercial properties.
The average price for real estate in Indonesia varies depending on the location and type of property. In Jakarta, for example, the average price for a luxury apartment is around IDR 50-100 million per square meter.
Some tips for investing in real estate in Indonesia include conducting thorough research on the market and location, working with a reputable real estate agent, and understanding the legal and regulatory framework.
The laws and regulations governing real estate investment in Indonesia include the Land Law, the Agrarian Law, and the Foreign Investment Law. Foreign investors are required to obtain certain permits and licenses before investing in Indonesian real estate.
Some of the benefits of investing in real estate in Indonesia include the potential for high returns, a growing market, and a favorable investment climate. Additionally, the Indonesian government has implemented various policies to encourage foreign investment in the real estate sector.
