The Indonesian government is focusing on completing major infrastructure projects and investment, both public and private. This is to increase the country’s economic expansion. Investments are welcomed to make connections better across the archipelago and to decrease Indonesia’s outdated reliance on raw product transfers.
With the increasing number of foreign arrivals, Indonesia eyes it as an opportunity to increase economic growth policies. The sad truth is, Bali cannot accommodate millions of new tourists, and projects are underway to establish 10 new tourist hubs. It will provide an opportunity for individual investors.
Many foreigners choose to live in Lombok instead. Some are considering to buy an island in Indonesia.
In Indonesia, purchasers of a property may expect gains well before its real estate market becomes conventional. While it is simple for foreigners to start a business, it is harder to invest in Indonesian property because of the laws that apply in most Western or developed countries. Foreigners who want to purchase land must be aware of these differences and that the legal conventions they have in their own country don’t necessarily apply in Indonesia.
The Indonesian Agrarian Law
The basic principles of Agrarian affairs – soil, water, and resources contained within the territory of the Republic of Indonesia are owned by the Indonesian nation and shall be for the interest and welfare of the country and people of Indonesia.
Article 16 Paragraph (1) of the Agrarian Law stipulates several types of Land Titles and Rights over the land, including:
- Hak Milik — roughly equivalent to Freehold title of English common law jurisdictions
- Hak Guna Usaha — Cultivation Rights Title
- Hak Guna Bangunan — Building Rights Title
- Hak Pakai — Right to Use Title
- Hak Sewa Untuk Bangunan — Right to Rent for Buildings
- Hak Membuka Tanah — Land Clearing Rights
- Memungut Hasil Hutan — Forestry Rights
- Hak Guna-air, Pemeliharaan & Penangkapan Ikan — Water Use and Fisheries Rights
- Hak Guna Ruang Angkasa — Airspace Use Rights
- Hak-Hak Tanah Untuk Keperluan Suci & Sosial — Land Title for Social & Religious Purposes
Indonesia has an intricate property investment potential. Foreigners are so eager to know and understand the process of how to buy an island in Indonesia. The Indonesian government has always been wary of foreigners owning land in the country. Due to this, strict laws are in place. Still, foreigners can acquire land titles provided that they follow proper procedure.
Why Buy an Island in Indonesia
In Asia, Indonesia tops the rental market with yields of as much as 7.09%. This rate means that Indonesia’s property market is reasonably priced. Villas located in Bali have attractive prices, with properties selling for $2,000 per square metre. While Bali has lower rental yields compared with Jakarta, property investors can benefit from the constant influx of tourists.
Non-residents who earn from rental income must pay a final withholding rate of 20% of the gross income. Since the country has double taxation agreements with other countries, the property tax may be reduced by 10%.
Foreigners may find it hard to invest in properties in Indonesia, though the government is actively seeking ways to attract more foreign investments.