Authored by the expert who managed and guided the team behind the Indonesia Property Pack
Everything you need to know before buying real estate is included in our Indonesia Property Pack
Are you considering investing in Indonesian real estate but unsure where to start? Wondering how recent regulations might affect your purchase? Curious about the best locations for foreign buyers in 2025?
We will lay down recent insights, providing you with the most up-to-date information on the Indonesian property market. Here, no guesswork, we rely only on solid data to guide your investment decisions.
Actually, we know this market inside and out. We keep tabs on it regularly, and all our discoveries are reflected in the most recent version of the Indonesia Property Pack
1) You can only own property in Indonesia under a "Right to Use" title with conditions and time limits
In Indonesia, foreigners can only own property under a "Right to Use" title.
This title is not the same as full ownership, meaning you can use the property but don't own it outright like in some other countries. The "Right to Use" title comes with specific conditions and time limits, usually between 80 to 100 years. This is part of Indonesia's national laws, which aim to prevent foreigners from having full 'freehold' ownership, the most complete form of property ownership.
In 2021, the Indonesian government introduced Government Regulation 18 to make it easier for foreigners to own property. However, this regulation still restricts them to the "Right to Use" title. The goal was to encourage foreign investment, but the ownership structure remains limited.
For those considering buying property in Indonesia, it's crucial to understand these limitations. The "Right to Use" title is designed to protect local interests while still allowing some level of foreign investment. This means that while you can enjoy the property, you won't have the same rights as a local owner.
Despite these restrictions, the Indonesian property market remains attractive to many foreigners. The country's beautiful landscapes and growing economy make it a desirable place to invest. However, potential buyers should be aware of the legal nuances involved in property ownership here.
Understanding these rules can help you make an informed decision about investing in Indonesian real estate. It's always a good idea to consult with a local expert or legal advisor to navigate these complexities. Being well-informed can save you from future headaches.
Sources: EU Reporter, ASEAN Briefing, Indonesia Investments
2) You may invest in short-term rentals in Bali and Lombok for higher returns than long-term rentals
Thinking about buying property in Bali or Lombok? Short-term rentals are booming thanks to a surge in tourism.
In 2023, Bali experienced a staggering 144.61% increase in international visitors compared to the previous year. This influx of tourists is driving up demand for short-term rentals, making it a hot market for property investors.
Short-term rentals in Bali are enjoying high occupancy rates, averaging 66% throughout the year. During peak seasons, these rates can soar to 89%, ensuring property owners see better returns than with long-term rentals.
With an average daily rate of $93 for short-term rentals, and even higher during peak times, the revenue potential is significant. This makes short-term rentals a lucrative option for those looking to invest in Bali's property market.
The popularity of platforms like Airbnb is evident, with a 24.62% increase in listings from July 2023 to May 2024. Positive reviews and high demand on these platforms underscore the profitability of short-term rentals.
Luxury villa rentals in Bali are particularly successful, with some properties earning monthly revenues as high as $2,889 in July 2023. This highlights the potential for significant earnings in this market.
Sources: Bali Management Villas, Hospitable.com, Coyote Wombat
Everything you need to know is included in our Real Estate Pack for Indonesia
3) You capitalize on the rising demand for eco-friendly housing popular with locals and expatriates
Eco-friendly and sustainable housing is becoming a big deal in Indonesia.
By 2023, over 100 buildings in Indonesia had earned green building certifications, and more than 3,000 buildings met mandatory green building codes. This shift highlights a growing commitment to sustainable construction. In Jakarta, for instance, green-certified buildings enjoy 30 to 80 percent lower annual utility costs compared to standard ones, making them a smart choice for both developers and homeowners.
Why the buzz around green buildings? Well, the savings on utility bills are a huge draw. Imagine slashing your energy costs by up to 80 percent. That's a compelling reason for anyone looking to invest in property. Plus, the Indonesian government is sweetening the deal with some attractive incentives.
These incentives include tax cuts and faster administrative processes, which make it easier and more appealing for developers to go green. The government even offers technical assistance to help projects get off the ground. This support has led to a noticeable increase in sustainable housing developments across the country.
For those considering buying property in Indonesia, this trend towards eco-friendly housing is worth noting. Not only do these homes offer financial benefits, but they also align with a global push towards sustainability. It's a win-win for the environment and your wallet.
So, if you're thinking about investing in Indonesian real estate, keep an eye on these green developments. They're not just a trend; they're the future of housing in the country.
Sources: Constructive Voices, IFC, AIP
4) You must avoid properties with unclear land titles to prevent legal battles and financial losses
When buying property in Indonesia, ensure the land title is clear and undisputed.
From 2015 to 2023, Indonesia saw nearly 3,000 land disputes in courts, almost double the previous administration's numbers. This highlights how common these issues are, making it crucial to verify land titles before purchasing.
In 2023 alone, 241 land conflicts affected numerous households, underscoring the potential problems of unclear titles. The Indonesian Supreme Court handles many of these cases, which can drag on for years, causing delays and stress for property buyers.
High-profile cases, like those involving Asia Pulp & Paper, illustrate the complexity of these disputes. With over a hundred conflicts, some cases, such as one in Jambi province, took more than a year to resolve, leading to significant legal costs.
These legal battles can be financially draining, with prolonged court proceedings adding to the burden. It's not just about the time; the financial implications can be severe, affecting your investment and peace of mind.
To avoid these pitfalls, it's wise to conduct thorough research and possibly consult with local experts who understand the intricacies of Indonesian land laws. This proactive approach can save you from lengthy legal battles and financial losses.
Sources: Mongabay, IJSTR, Mongabay
5) You must avoid buying properties in flood and earthquake zones to protect property values and rental yields
When buying property, it's vital to consider the risks of natural disasters like floods and earthquakes.
In 2023, Jakarta's flood protection gap soared to USD 25 billion, highlighting the financial risks and challenges in safeguarding properties. Frequent floods have caused property values to fluctuate, as the city's land sinks due to excessive groundwater pumping, worsening the flooding issues.
Indonesia faces a significant financing gap of IDR19.75 trillion (USD1.4 billion) to cover disaster losses, pointing to inadequate disaster insurance. This means property owners might face huge out-of-pocket expenses for repairs or rebuilding after disasters.
In 2023, Indonesia saw around 1,255 floods, a rise from previous years, coupled with its location in a seismically active area. The country averages 14 significant earthquakes or tsunamis per year, posing a serious threat to property stability and value.
Jakarta's economic exposure to disasters is concerning. A major earthquake or flood could create a gap of about USD 10 billion between economic and insured losses, indicating a high risk of property devaluation.
While specific data on rental yields in disaster-prone areas isn't provided, the trend suggests they might be lower due to the higher risks. Over the last 15 years, Indonesia has suffered losses of approximately $16.8 billion from natural disasters, impacting real estate significantly.
Sources: Swiss Re, The World Bank, OJK, Statista
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6) You profit by investing in Yogyakarta and Surabaya properties where prices are low but rising with development
Investing in properties in emerging areas like Yogyakarta and Surabaya can be a smart move for maximizing profit.
In 2023, property prices in these cities were still quite affordable. For example, the average housing price in Yogyakarta was 2.4 billion Indonesian rupiah, while in Surabaya, it was 2 billion Indonesian rupiah. These prices are low compared to more developed areas, offering a great opportunity for growth.
Yogyakarta is famous for its prestigious universities, attracting students from all over the world. This influx of students can increase the demand for housing, making it a promising area for property investment. Meanwhile, Surabaya boasts a well-developed transportation infrastructure, which supports commercial activities and makes it an attractive location for businesses and investors.
The Indonesian government is actively investing in infrastructure projects, with 190 National Strategic Projects completed by the end of 2023. These projects include new ports, toll roads, and airports, which are expected to boost the local economy and drive up property prices.
Government policies are also encouraging foreign investment by simplifying property purchase processes. This makes investing in these emerging areas even more appealing, as it reduces the hassle for international buyers.
With infrastructure development and supportive government policies, Yogyakarta and Surabaya are poised for growth, making them ideal locations for property investment. Prices are expected to rise as these areas continue to develop, offering a lucrative opportunity for investors.
Sources: Indonesia 2024: Property prices and buying process, Indonesia finalized 190 national strategic projects in 2023, Indonesia's housing market remains stable
7) You will find it challenging to get a mortgage as a foreigner so consider alternative financing options
Buying property in Indonesia as a foreigner can be tricky, especially when it comes to getting a mortgage.
Many foreigners in 2023 and 2024 found it tough to secure a mortgage because there aren't many options tailored for them. This means they often had to look for other ways to finance their purchase. On top of that, interest rates for foreigners were higher than for locals, making it pricier to get a loan.
Foreign buyers also had to meet strict requirements, like getting a Second Home Visa and Stay Permit, which took time and effort. Legal restrictions added to the challenge, as foreigners could only own property through leasehold agreements, usually for 30 years with a renewal option.
Many foreigners struggled to get loans from Indonesian banks because mortgage products weren't designed for them. This made the process even more complicated. Anecdotal evidence suggests that these hurdles were common, leaving many to explore alternative financing methods.
Sources: Let's Move Indonesia, Emerhub, Invest in Asia
8) You must be ready for cash transactions as many property deals in Indonesia still use this method
You might be surprised to learn that many property transactions in Indonesia are still done in cash, so be prepared for this traditional approach.
In 2023 and 2024, Indonesia had a large number of unbanked people, with nearly half of the adult population not having a bank account. This means that cash is often the go-to method for buying property. Even though financial inclusion is improving, with an index increase to 85.10% in 2022, many Indonesians still prefer cash transactions, especially in rural areas where banks are scarce.
In these rural areas, cash transactions are more common due to limited banking infrastructure. Surveys show that this preference for cash is a cultural norm deeply ingrained in society. Anecdotal evidence from expatriates and real estate agents highlights the prevalence of cash transactions in property deals, partly due to historical reliance on cash.
This reliance on cash stems from past limitations in the banking system. Despite efforts to improve financial inclusion, the preference for cash remains strong, influenced by cultural norms and trust issues with digital payment systems. Many Indonesians are cautious about digital payments, preferring the tangible nature of cash.
Expatriates and real estate agents often note that cash is king in property deals. This is not just a matter of convenience but also a reflection of trust and tradition. While digital payments are on the rise, they haven't fully replaced cash, especially in property transactions.
Sources: Ciptadana, DBS, Antara News
Everything you need to know is included in our Property Pack for Indonesia
9) You maximize investment by targeting properties for the growing middle class seeking modern amenities and convenience
Indonesia's middle class is booming, especially in 2023 and 2024.
By 2025, around 50 million Indonesians will be part of this economic group, which means more people can afford better living conditions. This shift is opening up opportunities for property investors.
With more disposable income, the middle class is now eyeing high-end residential and commercial properties. These properties are popular for their modern and luxurious features, a direct result of the middle class's rising purchasing power.
Indonesian homebuyers are increasingly interested in properties with modern amenities like swimming pools, fitness centers, and 24-hour security. These features are becoming standard in high-end properties, reflecting the middle class's desire for convenience and comfort.
Investing in properties that cater to this growing demographic can be lucrative. The middle class is not just looking for a place to live; they want a lifestyle upgrade, which means properties with modern amenities and convenient locations are in high demand.
Sources: Statista, Pakubuwono Development
10) You may invest in properties near new infrastructure projects to benefit from significant value increases
Properties near new infrastructure projects are seeing a big boost in value.
Take the Solo-Yogya toll road, for example. It sparked a 21% jump in housing demand nearby. In Jakarta, the new LRT Phase 1B project made apartment rentals in North and East Jakarta four times more popular. These are just a couple of examples from 2023 and 2024 showing how infrastructure can really drive up property demand and value.
Looking back, the Djuanda Flyover in Sidoarjo Regency is a great case. It tripled the availability of new housing and pushed property prices up. Similarly, the Kamal-Teluknaga-Rajeg-Balaraja toll road in Tangerang Regency increased housing availability by 34%, which also boosted property values. These examples clearly show how infrastructure projects can positively impact property markets.
When new roads or airports pop up, they don't just make it easier to get around. They also make the area more appealing to buyers and investors. This is because better connectivity and accessibility are huge selling points. So, if you're thinking about buying property, keep an eye on where these projects are happening.
Insider tip: Properties near these projects often see a significant increase in value over time. It's like getting in on the ground floor of a big opportunity. So, if you spot a new toll road or airport being built, it might be worth considering a property nearby.
Sources: Business Wire, GlobeNewswire, PwC
11) You must verify the property's legal status to avoid disputes or losing your investment
Many foreigners make the mistake of not thoroughly checking the property's legal status, leading to potential disputes or loss of investment.
In Indonesia, unregistered long-term rentals are a common pitfall for foreign buyers. These arrangements often lead to legal trouble because they aren't recognized under Indonesian law. Some buyers are advised to hold properties through local individuals or companies, but these setups can be risky and unenforceable.
Legal experts and real estate agents stress the importance of due diligence. They recommend that foreign buyers carefully verify property titles and lease agreements. The complexity of Indonesian property laws can easily lead to misunderstandings and disputes, making this advice crucial.
The Indonesian government has strict regulations for foreign property ownership, limiting it to specific zones. These rules, along with changes in property laws, can create confusion. Personal stories from foreigners who faced legal challenges highlight the need for thorough property checks.
One notable case is the Indah Puri Golf Resort dispute, where foreign owners faced legal issues due to an expired lease. Despite changes in laws over the years, the lack of thorough legal checks led to significant problems for these owners.
Frequent reports of property fraud affecting foreign investors further emphasize the need for caution. Understanding the local legal landscape is essential to avoid potential pitfalls and ensure a smooth property purchase process.
Sources: Mondaq, SSEK, In-House Lawyer, IJCJS
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12) You must consult a legal expert as Indonesia restricts foreign land ownership to ensure compliance with local laws
Foreigners can't own freehold land in Indonesia, so it's crucial to know your options.
Instead of freehold titles, foreigners can explore options like the Right to Use (*Hak Pakai*), Lease Rights (*Hak Sewa*), and the Right to Build (*HGB*). Each of these comes with its own set of rules and limitations, but they offer a way to invest in Indonesian property without full ownership. These alternatives are designed to protect local land ownership while still allowing some foreign investment.
It's important to understand that legal disputes can arise if these rules are not followed. Consulting with a legal expert is essential to navigate these complexities and ensure compliance with local laws. The Indonesian government has been working to streamline these processes, making it easier for foreigners to invest while still adhering to regulations.
In recent years, the government has introduced several regulations to encourage foreign investment, including those related to property ownership. These changes aim to make the process more transparent and accessible, but it's still vital to have a clear understanding of the legal landscape. Staying informed can help you avoid potential pitfalls and make the most of your investment.
For those interested in the Indonesian property market, it's worth noting that the government is keen on attracting foreign investment. This is evident in their efforts to simplify regulations and make the process more investor-friendly. However, the emphasis remains on protecting local land ownership, so understanding the nuances of these regulations is key.
Before making any decisions, it's advisable to consult with a legal expert who is familiar with Indonesian property laws. This will help you navigate the complexities and ensure that your investment is both secure and compliant. Being proactive in understanding these regulations can save you time and money in the long run.
Sources: Permitindo, Deloitte, Invest in Asia
13) You must build relationships as locals use personal networks and word-of-mouth for the best property deals
In Indonesia, 89% of people trust recommendations from those they know, making personal networks key in property deals.
Real estate agents in Indonesia often emphasize the power of word-of-mouth. They rely heavily on personal connections and referrals to match buyers and sellers, which often leads to successful transactions. This isn't just a passing trend; it's deeply embedded in the business culture, where trust and personal relationships are crucial.
For expatriates diving into the Indonesian property market, building local relationships is often the secret to success. These connections offer valuable insights and recommendations, helping them snag the best deals. Trust is a cornerstone of decision-making in this market, highlighting the importance of these relationships.
Understanding this cultural nuance can give you an edge. Locals often find the best property deals through personal networks and word-of-mouth, so it's wise to build relationships. Engaging with the community can open doors to opportunities that might not be visible otherwise.
In this environment, knowing the right people can be more valuable than any online listing. Personal connections often lead to the most lucrative deals, making them an essential part of the property buying process.
So, if you're considering buying property in Indonesia, remember that it's not just about the property itself. It's about who you know and the trust you build. These relationships can be your ticket to the best deals.
Sources: Nielsen, Emerald Insight
14) You gain an edge by partnering with a local Indonesian to navigate legal complexities and cultural nuances
Teaming up with a local Indonesian citizen can be a real advantage when buying property in Indonesia.
In recent years, foreigners have faced strict property ownership rules, like being limited to certain property types for up to 30 years and not being able to own freehold titles. This has made it tough for outsiders to dive into the market. But with a local partner, you can better handle these legal hurdles, like rental laws and taxes, and avoid potential legal headaches.
Local partners offer valuable insights into urban consumer preferences, which is key for successful real estate ventures. They can guide you through detailed market research, ensuring your property deals match what consumers want. This insider knowledge is crucial for making informed decisions.
Understanding cultural nuances is another area where local partners shine. Cultural misunderstandings can derail deals, but with a local by your side, these risks drop significantly. History shows that foreign investors who team up with locals often see higher success rates in property transactions.
Local partners help you meet all legal requirements efficiently, speeding up the transaction process. They know the ins and outs of the market, which can be a game-changer. Partnering with a local can streamline your property journey and make it much smoother.
In short, having a local partner can be the key to unlocking the Indonesian property market. They bring expertise and cultural understanding that can make all the difference in your investment success.
Sources: The Jakarta Post, CPT Corporate, Kadence
Everything you need to know is included in our Pack for Indonesia
15) You must understand Indonesia's property market is volatile so focus on long-term investment not quick profits
Investing in Indonesia's property market is like riding a rollercoaster, so it's wise to think long-term.
In bustling cities like Jakarta and Bali, property prices have soared, with Jakarta's residential areas hitting nearly 16 million Indonesian rupiah per square meter. However, this growth isn't always smooth. The market can be unpredictable, with projections showing only a modest growth of 1.21% from 2024 to 2029. This means that while there are opportunities, patience is key.
Economic factors significantly influence this volatility. During the pandemic, developers had to rely on their own funds due to high land prices and limited affordable options. Government policies aimed at boosting the market can also change the landscape. Efforts to attract foreign investors have increased interest, but these regulatory shifts can bring uncertainty, making it crucial to stay informed.
Inflation is another element that can shake things up. While specific numbers aren't available, rapid inflation can drive up property costs, making it tough for smaller developers to keep up. This can limit the housing supply and add to the market's ups and downs. Foreign investment trends add another layer of complexity. While they can stabilize the market, they also introduce new dynamics that can affect property prices.
For those considering a purchase, it's essential to understand that the property market in Indonesia can be volatile. Having a long-term investment strategy is crucial, rather than expecting quick profits. The market's unpredictability means that while there are opportunities, they come with risks that need careful consideration.
Sources: Statista, Statista, Space Coast Daily
This article gives you valuable insights, but remember, it’s not and will never be investment advice. We pull data from a range of sources to provide you with the most accurate picture possible, yet we can’t guarantee complete accuracy. Markets are difficult to predict. Make sure to do your own research and consult a professional before making any financial moves. Any risks or losses are your own responsibility.