Jakarta. Developers have applauded the government's planned policy that will allow foreigners to own properties in Indonesia as they say it will bring more opportunities to the property sector, which is facing sluggish growth.
Iwan Sunito, chief executive officer of Crown Group, said the new policy would boost developers from national to global players. Foreign ownership could help expand the market to international buyers amid economic slowdown.
"The developers had only been focused on the domestic market. When the economy is weakening, the property market is impacted and shows a decline.
"With the new market for foreigners, it will encourage developers to have more developments with international standards."
Still, Iwan warned the government to keep an eye on the policy's implementation to secure local property prices.
Finance minister Bambang Brodjonegoro said on Wednesday that the government would allow foreigners to have property in Indonesia, but would restrict it to luxury apartments that cost at least Rp 5 billion per unit. His ministry is currently working on revising the 1996 government regulation on foreign ownership of property.
The decision was made after President Joko Widodo met with officials from property association Real Estate Indonesia (REI) on Tuesday.
President Joko Widodo's spokesman Teten Masduki said that the president approved the suggestion from REI officials to support the domestic property sector following the slowdown of Indonesia's domestic economy. The policy is also expected to bolster the confidence of developers to compete in the regional market.
Rudy Margono, president director of private developer Gapura Prima Group, also welcomed the new policy, which he said could boost property growth by 20 percent.
"We hope the regulation will arrange that foreigners can only own property that is more than 100 square meters and located above the second floor of the apartment," he said on Wednesday.
Director of Megapolitan Development Desi Yuliana said he expected the government to complete the regulation as soon as possible.
"If the regulation is put into effect the sales of Megapolitan property will increase whether [the projects] in Cinere, Depok of West Java, Karawaci in Tangerang and Bogor in West Java," she said.
Amran Nukman, the head of REI's Jakarta branch, said the new regulation was important because Indonesia will be entering the Asean Economic Community in the next six months.
He claimed that if the government did not allow foreign ownership, Indonesia's wealthy people would buy properties overseas due to the high return of investment. The result would be no additional flow of investment to Indonesia that would ultimately impact on economic growth and property sector.
The regulation will have multiplier effect on property's supporting industries, such as cement, ceramics and also the construction work force.
Separately, Andi Rukman Karumpa, secretary general at the Indonesia Builders Association or Gapensi, said the new policy would help boost the construction market, which he said will be "even sexier." The construction sector is one of 138 industries related to property.
Before the government announced the policy, Andi said, the construction market was projected to grow 14.26 percent, or about Rp 446 trillion, this year following the government's plan to accelerate infrastructure development.
Indonesia's construction market was valued at $267 billion last year, the fourth biggest in Asia after China ($1.78 trillion), Japan ($742 billion) and India (427 billion).
However, property observer Ali Tranghanda said the regulation must contain clear restrictions, such as on zoning and price. The government must also limit the ownership to apartments, not landed property, he said.
Ali added that there was no instrument to control land price in Indonesia such as land banks, which should be of concern.
"I am concerned if the market is fully open, we will be in the property bubbles state within five years," he said.
Investor Daily & GlobeAsia