Indonesia’s accelerating economic growth and growing consumer market make it an ideal country for foreign investors. With recent government reforms, including the ability for foreigners to buy property, Indonesia offers numerous investment opportunities. But before using these opportunities, knowing which cities and regions in Indonesia are the best and most promising to invest in real estate is essential.
1. Surabaya
Surabaya is the second-largest city in Indonesia and one of the top five cities for real estate investment. It is mainly known as an excellent strategic location for commercial activities because of its efficient transportation networks from trains, taxis, airports, and seaports.
Surabaya is ideal for new investors compared to Jakarta since it has lower living expenses, less pollution, and less traffic. In addition, as Jakarta is pushed out, Surabaya may become the next most prominent commercial hub.
Acquiring the necessary permits has also been simplified with the Surabaya Single Window Permit Service. As a one-stop platform, it supports business efficiency since foreigners can process both business permits and foreign investment permits and building permits online.
Real estate prices in Surabaya
| Average buy price | Average price/sqm. | Average rent price | Annual growth | Rental yield | |
|---|---|---|---|---|---|
| House | IDR 2.4 billion ($160.685) | IDR 14.2 million ($950) | IDR 58.9 million ($3.940) | – 3,2% | + 30% |
| Townhouse | IDR 2 billion ($133.900) | IDR 14.6 million ($980) | – | + 1,7% | – |
| Apartment | IDR 472 million ($31.600) | IDR 12.8 million ($860) | IDR 34.4 million ($2.300) | – 1,7% | + 90% |
| Commercial | IDR 3.6 billion ($241.030) | IDR 17.3 million ($1.160) | IDR 118.1 million ($7.910) | – 1,7% | + 39,2% |
| Condo | IDR 3.4 billion ($227.640) | IDR 18.2 million ($1.220) | IDR 210.6 million ($14.100) | + 8,6% | – |
| Land | IDR 4.3 billion ($287.900) | IDR 13.2 million ($885) | IDR 120.8 million ($8.090) | + 4,1% | + 34% |
2. Balikpapan
Balikpapan is a major city located in East Kalimantan. It is known for housing large oil refineries and being a tourist hub because of its many beaches. Balikpapan’s economic potential stems from its proximity to Nusantara, which will become Indonesia’s new capital city in 2024. As Nusantara’s neighboring city, it’s undergoing significant infrastructure development, making logistic issues less concerning.
Foreigners looking to invest or buy a property should take advantage of the low property prices in Balikpapan before it skyrocket once construction is done, especially once Nusantara opens.
Property prices in Balikpapan
| Average buy price | Average price/sqm. | Average rent price | Annual growth | Rental yield | |
|---|---|---|---|---|---|
| House | IDR 535 million ($35.050) | IDR 9 million ($590) | IDR 12.9 million ($845) | – 2,6% | – |
| Commercial | IDR 4.2 billion ($275.140) | IDR 28.9 million ($1.890) | IDR 13.9 million ($910) | + 4,3% | – |
| Land | IDR 2.5 billion ($163.770) | IDR 3.2 million ($210) | – | – 39,5% | – |
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3. Yogyakarta
Tourism plays a significant role in Indonesia’s economy. It has been instrumental in driving economic growth, particularly in popular tourist destinations such as Bali, Ubud, and Jakarta. The post-pandemic recovery of Indonesia’s economy has been primarily fueled by the tourism industry, making these destinations attractive for investment opportunities. However, with a saturation of investment in these areas, it may take time to find new prospects for investment.
Yogyakarta offers a unique opportunity for investment in the tourism industry. The city is steeped in rich cultural and historical heritage, making it a popular destination.
Property prices in Yogyakarta
| Average buy price | Average price/sqm. | Average rent price | Annual growth | Rental yield | |
|---|---|---|---|---|---|
| House | IDR 709 million ($45.735) | IDR 10.2 million ($655) | IDR 36.8 million ($2.375) | + 14,5% | + 62,3% |
| Condo | IDR 4 billion ($258.020) | IDR 11.5 million ($740) | – | – | – |
| Townhouse | IDR 1.4 billion ($90.305) | IDR 11.5 million ($740) | – | – 9,2% | – |
| Commercial | IDR 3.1 billion ($199.970) | IDR 10.3 million ($665) | IDR 121.3 million ($7.825) | + 28% | – |
| Apartment | IDR 980.4 million ($63.240) | IDR 19.9 million ($1.285) | IDR 5 million ($320) | + 60,8% | – |
| Land | IDR 483 million ($31.155) | IDR 2.9 million ($190) | IDR 52.5 million ($33.865) | – 30,9% | – |
4. Bandung
Bandung is West Java’s capital city, attracting a booming market nowadays- startups. Neighboring Jakarta, this city has been eyed to become Indonesia’s Silicon Valley. Its local government has actively supported promising tech companies and its tech-savvy population by boosting internet access, offering IT courses, and implementing policies attractive to tech companies.
Investors in the technology industries should take advantage of the friendly policies and attitudes towards startups in this city.
Property pricing in Bandung
| Average buy price | Average price/sqm. | Average rent price | Annual growth | Rental yield | |
|---|---|---|---|---|---|
| House | IDR 724 million ($48.475) | IDR 11.7 million ($785) | IDR 28.3 million ($1.895) | – 8,4% | + 46,8% |
| Townhouse | IDR 1.1 billion ($73.650) | IDR 12.2 million ($815) | – | + 21,3% | – |
| Apartment | IDR 562.2 million ($37.650) | IDR 15 million ($1.005) | IDR 27.6 million ($1.850) | + 2,8% | + 58,8% |
| Commercial | IDR 3.8 billion ($254.420) | IDR 13.7 million ($920) | IDR 136.2 million ($9.120) | + 17,7% | + 43,2% |
| Condo | IDR 842 million ($56.375) | IDR 9.9 million ($660) | – | + 35,3% | – |
| Land | IDR 305.3 million ($20.440) | IDR 2.4 million ($160) | – | – 17,1% | – |
5. Semarang
Semarang, located in Central Java, offers a thriving and growing economy perfect for investors seeking to establish a business with less competition. With its lower operational costs and wages compared to the highly competitive Jakarta, Semarang is an excellent location for startups and investors looking for an opportunity to grow and succeed.
In addition, the city’s recognition as ASEAN’s cleanest tourist destination in Southeast Asia attracts tourists and potential customers for your business. Additionally, its abundant green spaces, parks, and scenic views make it attractive for employees to live and work, contributing to a higher quality of life and employee satisfaction.
Whether you’re looking to launch a new business or expand your existing one, Semarang is a prime location for investment that offers a unique combination of growth potential, affordability, and high quality of life.
Property prices in Semarang
| Average buy price | Average price/sqm. | Average rent price | Annual growth | Rental yield | |
|---|---|---|---|---|---|
| House | IDR 660 million ($42.575) | IDR 9.2 million ($595) | IDR 43.8 million ($2.825) | – 19,1% | + 79,6% |
| Townhouse | IDR 761 million ($49.090) | IDR 11.1 million ($715) | – | + 16,8% | – |
| Commercial | IDR 3.5 billion ($225.770) | IDR 10.7 million ($690) | IDR 180.1 million ($11.620) | – 16,4% | + 62,5% |
| Apartment | IDR 540 million ($34.830) | IDR 20.3 million ($1.310) | IDR 55.8 million ($3.600) | – 64,8% | – |
| Land | IDR 279 million ($17.995) | IDR 1.9 million ($122) | – | – 33,6% | – |
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6. Medan
Medan is an urban hub attractive to trade, agriculture, and real estate entrepreneurs. One of the key advantages of doing business in Medan is its strategic location.
Its proximity to other major cities in Southeast Asia and its well-developed transportation network make it an attractive destination for businesses seeking regional markets. It also has a supportive business environment, favorable regulatory framework, and high-quality infrastructure, which makes it an ideal location for companies looking to grow and succeed in this region.
Property prices in Medan
| Average buy price | Average price/sqm. | Average rent price | Annual growth | Rental yield | |
|---|---|---|---|---|---|
| House | IDR 1.3 billion ($85.160) | IDR 9.8 million ($640) | IDR 37.8 million ($2.475) | + 67,8% | + 34,3% |
| Townhouse | IDR 693 million ($45.400) | IDR 7.8 million ($510) | – | – | – |
| Apartment | IDR 2.2 billion ($144.120) | IDR 27.1 million ($1.775) | IDR 108.3 million ($7.095) | + 47,7% | + 59,3% |
| Commercial | IDR 2 billion ($131.020) | IDR 9.2 million ($600) | IDR 54.8 million ($3.590) | + 13,8% | + 32,5% |
| Land | IDR 4.2 billion ($275.135) | IDR 10.2 million ($670) | IDR 3.2 million ($210) | + 7,5% | + 0,9% |
7. Makassar
Makassar is an urban melting pot located in Eastern Indonesia. As one of the four main central cities, business herein remains competitive, particularly in the service sector, transportation, and trading industries. It is one of Indonesia’s primary ports, including international shipping connections.
While Makassar is an established hub for business, it is essential to note that commercial properties in the city can be of high value due to their popularity. However, despite the higher cost of real estate, building a business in Makassar remains a desirable option because of its accessibility to consumers and ease of logistics.
With its large population and well-developed transportation network, businesses have a reachable and accessible market, making connecting with customers and expanding their customer base easier. Additionally, the efficient logistics network makes importing and exporting goods easier, reducing the time and cost of transportation.
Property prices in Makassar
| Average buy price | Average price/sqm. | Average rent price | Annual growth | Rental yield | |
|---|---|---|---|---|---|
| House | IDR 960 million ($64.275) | IDR 13 million ($870) | – | + 109,9% | – |
| Townhouse | IDR 838 million ($56.105) | IDR 10 million ($670) | – | – 68,4% | – |
| Apartment | IDR 1.1 billion ($73.645) | IDR 16.7 million ($1.120) | – | + 619,9% | – |
| Commercial | IDR 4.3 billion ($287.895) | IDR 24.2 million ($8.315) | IDR 96 million ($6.430) | + 3,4% | – |
| Land | IDR 626 million ($41.910) | IDR 456.700 ($30,6) | – | – 74,7% | – |
8. Palembang
Known for hosting the 2011 Southeast Asian Games alongside Jakarta, Palembang offers a thriving business environment for entrepreneurs. With a strong economy driven by the manufacturing and construction sectors, accounting for 30% and 18%, the city presents ample opportunities in these fields.
As a leading rubber exporter, entrepreneurs can take advantage of the established commercial activity in the city. It boasts a thriving retail landscape, robust infrastructure, and a welcoming business culture perfect for your entrepreneurial endeavors.
Real estate prices in Palembang
| Average buy price | Average price/sqm. | Average rent price | Annual growth | Rental yield | |
|---|---|---|---|---|---|
| House | IDR 347 million ($23.230) | IDR 8 million ($535) | – | – 28,2% | – |
| Land | IDR 735 million ($49.200) | IDR 1.9 ($125) | – | – 82,9% | – |
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9. Bali
All around the world, Bali is famous for being a popular tourist destination attracting millions of visitors annually. The tourism and hospitality sector is the most significant contributor to its economy. But besides being a holiday destination, the Bali real estate market offers a lot for foreign investors. The Indonesian government has also made it easier for foreigners to establish a business in Bali by relaxing regulations and simplifying the process for obtaining necessary permits and licenses.
Property prices in Bali
| Average buy price | Average price/sqm. | Average rent price | Annual growth | Rental yield | |
|---|---|---|---|---|---|
| House | IDR 2.4 billion ($161.195) | IDR 14.7 million ($987) | IDR 85.1 million ($5.715) | + 47,2% | + 42,4% |
| Commercial | IDR 4.3 billion ($288.804) | IDR 17.3 million ($1.161) | IDR 158.1 million ($10.618) | + 0,2% | + 44,2% |
| Apartment | IDR 1.7 billion ($114.178) | IDR 22.9 million ($1.538) | IDR 2.2 million ($147) | + 78,7% | – |
| Land | IDR 1.8 billion ($120.895) | IDR 1.7 billion ($114) | IDR 15.7 million ($1054) | + 28,1% | + 10,5% |
10. Jakarta
Finally, one must mention Jakarta before discussing the best cities for investing in Indonesia. Known as the gateway to the rest of the country, Jakarta is Indonesia’s top commercial hub. Jakarta is one of the world’s most populous cities and boasts a highly competitive market for foreign investors. The city is mainly developed in the financial and manufacturing sector, and small and medium-sized enterprises play a crucial role in its economy, accounting for nearly half of its GDP.
Despite its favorable business conditions, the market in Jakarta can be challenging for new entrants, with established players dominating specific industries.
Property prices in Jakarta
| Average buy price | Average price/sqm. | Average rent price | Annual growth | Rental yield | |
|---|---|---|---|---|---|
| House | IDR 3.4 billion ($220.140) | IDR 18.2 million ($1.180) | IDR 88.7 million ($5.740) | – 6,1% | + 30,9% |
| Condo | IDR 251 million ($16.250) | IDR 1.9 million ($125) | IDR 145 million ($9.390) | – 80,3% | + 696% |
| Townhouse | IDR 1.4 billion ($90.645) | IDR 18.1 million ($1.170) | IDR 151 million ($9.775) | – 49,2% | – |
| Apartment | IDR 906 million ($58.660) | IDR 18 million ($1.165) | IDR 5 million ($325) | – 9% | + 6,6% |
| Commercial | IDR 4.3 billion ($278.400) | IDR 25.2 million ($1.630) | IDR 38.7 million ($2.505) | 0% | + 10,8% |
| Land | IDR 4 billion ($258.980) | IDR 12.6 million ($815) | IDR 443 million ($26.680) | + 20,9% | + 133,3% |
Benefits of real estate investment in Indonesia
With its welcoming policies towards foreign investment, Indonesia offers a unique opportunity for those interested in real estate investment.
- Steady real estate market growth: The Indonesian real estate market has grown steadily over the years, indicating the possibility of property value appreciation. Real estate investments can produce long-term financial gains as the country’s economy grows and urban areas expand.
- Growing demand for property: The country’s expanding middle class, rapid urbanization, and growing population increase the demand for housing and commercial spaces. Because of this demand, real estate investors can profit from rental income or property sales.
- Attractive rental yield: The rental market in Indonesia can provide attractive yields, particularly in popular areas such as Jakarta, Bali, and other major cities. With a growing population and a thriving tourism industry, rental properties can provide investors with consistent income.
- Many investment opportunities: Indonesia offers a diverse range of real estate investment opportunities, including residential properties, commercial spaces, industrial properties, and land. This variety allows investors to select properties that match their investment objectives and risk tolerance.
Challenges when buying property in Indonesia
Investing in foreign real estate is a challenging feat. While real estate remains a lucrative investment, the process is far more complex and poses more risk when made overseas.
- Complex legal framework: Indonesia’s legal and regulatory framework can be complicated and subject to frequent changes. Navigating the bureaucracy and understanding the rules and procedures can be difficult, especially for foreign investors. It is critical to engage legal professionals specializing in Indonesian real estate law to ensure compliance and mitigate risks.
- Ownership restrictions for foreigners: Foreign investors in Indonesia face restrictions on land ownership. The law states that foreigners cannot directly own land unless they meet specific criteria, such as through a leasehold arrangement or the formation of a PT PMA. These constraints necessitate careful consideration and adherence to legal structures.
- Land title issues: Property disputes and land title issues can arise in Indonesia. Before making a purchase, conducting thorough due diligence and verifying the ownership history, land titles, and any potential legal conflicts is critical. Working with reputable agents, conducting thorough surveys, and seeking legal counsel can all help to mitigate these risks.
You can avoid these problems by working with an Indonesian real estate agent. They know the local laws and regulations and offer guidance to ensure successful real estate transactions.
How to buy real estate property in Indonesia?
Establishing a PT PMA (foreign-owned company) is the safest and most straightforward option for foreigners looking to buy real estate in Indonesia. This type of company allows foreign investors to legally bring their funds into Indonesia. The primary advantage of a PT PMA is that it serves as a legal entity capable of acquiring real estate through freehold and leasehold ownership.
It’s essential to understand that the property is owned by the PT PMA itself, not the individual foreign owner of the company. A PT PMA can also facilitate obtaining a residency permit, such as a Working KITAS or Investor KITAS. After establishing the PT PMA, it becomes eligible to apply for Hak Pakai (Right to Use) and Hak Guna Bangunan (Right to Build) licenses necessary for property utilization, construction, and ownership.
Working with a real estate agent in Indonesia
When foreigners want to buy real estate in Indonesia, they should seek the advice of a reputable real estate agent. Agents have the local knowledge, market knowledge, and legal understanding required to navigate the complexities of the Indonesian real estate process. They can help foreigners navigate the legal requirements, find suitable properties, negotiate favorable deals, and ensure a smooth transaction.
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Conclusion
From its growing economy and diverse market options, investing in real estate in Indonesia remains a lucrative potential for business. Investing in real estate in Indonesia has become increasingly attractive in recent years due to the country’s growing economy. It remains a lucrative potential for business and should be noticed by those seeking to diversify their portfolio. With careful consideration of the risks and benefits, foreign investors can make informed decisions and reap substantial rewards.
Frequently Asked Questions (FAQs)
Is Indonesia a good place to invest?
Indonesia’s large population, natural resources, and solid consumerist culture make it ideal for investors.
What are Tier 1 cities in Indonesia?
Tier 1 cities in Indonesia are Jakarta and Surabaya. They are called megacities due to their high GDRP per capita and access to primary infrastructures.
Where is the best city to live in in Indonesia?
Finding the best place to live in Indonesia depends on individual preferences. Jakarta and Surabaya are the best options for an urban and fast-paced lifestyle. On the other hand, for a more laid-back option, Bali and Bandung are the go-tos.
