Evaluating a Property Interest in Beautiful Indonesia

Evaluating a Property Interest in Beautiful Indonesia

Many folks visit Bali, or other parts of Indonesia, and become enamored with the laidback lifestyle and easygoing vibe that permeates through the entire country. This nation of many islands seems to be the perfect place to live, whether it be permanently or just for a season or two. However, the process of buying or leasing a property in a popular tourist destination is often unlike the process in your home country. It is important to understand the pertinent laws, rules, and regulations of the local real estate scene.

Indonesian Requirements for Ownership

Each country has a unique set of rules for foreign ownership of land or buildings. In Indonesia, some of the red tape surrounding foreign land ownership was rolled back as recently as January 2016. Currently, foreigners are allowed to own luxurious apartments in Indonesia under a set of rights called “right-to-use.” This set of ownership rights does not carry all of the benefits of “right-to-own,” the ownership by which Indonesian citizens hold and inherit property, but it still represents a step in the right direction.

In January 2016, it was also announced that expats residing and working in Indonesia can purchase land and property under the “right-to-use” category. However, it should be noted that there is a requirement that you purchase the property for a specific, predetermined price, thereby making it difficult for some foreigners to utilize this option. Similarly, if the foreigner chooses to claim residency in another country after the purchase, the landed property in Indonesia must be sold to a legitimate purchaser within one year.

As the ownership laws are tedious and difficult for most foreigners to fulfil the requirements, most people choose to lease property in Indonesia.

Mitigating Risks in Purchasing or Leasing Abroad

Purchasing or leasing property in any foreign market has its own set of challenges; this is particularly true when considering property in a tourist destination. There are resources available to make the process easier and less risky for a foreign investor. The use of an online property portal such as Dot Property Indonesia provides renters and buyers with expert insight into the local market. An online portal adds transparency to the transaction and absorbs a lot of the time and effort required to research properties, which is necessary when looking into a developing market like Indonesia.

Determining Rental Value

The biggest difference between a holiday home and your family home is the amount of time you spend in each one. A primary residence is going to be occupied for most, if not all, months of the year. However, a second home in Indonesia will remain empty for weeks or months at a time. A huge consideration when taking a long-term lease on a holiday home in Indonesia is its underlying rental value.

This becomes even more important if your ability to lease the property is tied to rental possibilities. On the other hand, many foreigners are investing in Indonesian property only for the potential return from short or long-term renters and never intend to use the property for personal purposes. Therefore, a necessary bit of information to gather from a local real estate agent (or other property expert) is the rental yields for other vacation homes in the area.