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Real estate news in Indonesia

Indonesia introduces tax breaks and discounts on property purchases to stimulate the real estate sector

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As Indonesia gears up for its upcoming elections in February, the government is rolling out strategic measures aimed at revitalizing the country’s residential real estate sector, which has experienced years of sluggish growth. With a focus on the apartment sector that has seen little to no growth over the past five years, the government’s initiatives are designed to inject new life into the market and attract both local end-users and foreign investors.

Tax breaks and discounts on property purchases in Indonesia

In an attempt to revive the residential sector, particularly the stagnating apartment market, the Indonesian government has introduced a series of tax breaks and incentives. These measures include property tax breaks for property purchases priced up to ₱ 2 billion ($36 million) until June, followed by a 50% discount on VAT. Additionally, the requirements for foreign buyers have been significantly relaxed, allowing property purchases with just a passport, a move away from the previous need for a limited or permanent stay permit card.

The impact on foreign investment and local markets

These government measures are expected to profoundly impact Indonesia’s real estate market, particularly in attracting foreign investment. The relaxed rules on foreign ownership are anticipated to spur real estate sales in popular destinations like Bali, where the market is ripe for second-home residential developments. Furthermore, the introduction of the Golden Visa scheme, offering a five- to 10-year visa for significant investments, is poised to boost property demand further.

These developments present a lucrative opportunity for current property owners and investors in Indonesia. The government’s efforts to stimulate the market could increase property values, especially in areas targeted by foreign investors and in cities benefiting from improved connectivity, such as Bandung with the new high-speed train, Whoosh, enhancing its appeal.

Future prospects on Bali and beyond

Experts believe that while these measures are not a panacea for all the market’s challenges, they are steps in the right direction that could smooth the path for growth amid potential economic uncertainties, including rising interest rates. The property and construction industries, significant contributors to Indonesia’s GDP, stand to gain from these initiatives, potentially leading to a more vibrant and dynamic real estate market.

Particularly in Bali and other holiday destinations, the market is expected to see a resurgence of activity, driven by the return of tourists and the appeal of residential developments for second homes. The government’s focus on infrastructure development, including trains and toll roads, is also anticipated to leave a lasting positive impact on the real estate market, enhancing property values in well-connected areas.

As Indonesia’s real estate market looks to the future, the government’s current initiatives could mark the beginning of a new era of growth and prosperity for property investors and owners alike. With strategic measures in place to attract foreign investment and stimulate local demand, the Indonesian real estate market is poised for a significant upturn in the coming years.

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Written by Matt Timmermans

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