TO PROBE INTO THE PROSPECT OF THE PROPERTY SECTOR

Players of the property were expecting the Government to relax policy for the property sector to revitalize the sector. In one of the chapters of the strategy launched on September 9, 2015 last it was mentioned that the Government would promote the property sector including house for the low income group.

Unfortunately the property sector was feared to be obstacle by tax problem since the Government was busy collecting tax from the property sector. Developers and consumers of the property sector expected the Government’s plan to collect tax from the property sector could be reconsidered because the condition today was not condusive to changes.

As known there was Government’s plan to change the policy for the property tax which by last month was only rumor. It was statement was still indefinite and consistent in the storm of complaint. The result was that property sales turned shaky. Data showed that by QW II/2015 last sales was posted as 68% lower than Q I/2015.

Previously the Minister of Finance Bambang S.Brodjonegoro announced the Minister would revise Ministrial Regulation (PMK) No. 130/PMK.011/2013. The point was that price of property worth above Rp. 10 billion and was subject to Tax-for-Luxurious-Goods (PpnBM) not Rp. 5 billion or Rp. 2 billion as rumored.

The Government also planned to clarify the rules for property ownership for foreign citizens by revising some Regulations. Legal certainty for foreign citizens to own property in Indonesia could serve as tonic for property sales which was today low.

Property players believed that to set the limit of Rp. 10 billion price would breeze out hope because consumers would not be burdened by Value Added Tax for Luxurious Goods (PPnBM) if they bought property worth below Rp billion. Previously the Government planned to impose tax on goods worth above Rp. 2 billion and Rp. 5 billion which discouraged consumers to buy.

If PPnBM tax of 20% were imposed on property worth Rp. 2 billion – Rp. 5 billion, the total tax due would be 40% of price, broken down as: Income Tax 5%, Sales tax 10%, Tax on Luxurious Goods 20% and Land-and Building Tax 5%. Today supply of apartments in Jakarta at the price of Rp. 2 billion – Rp. 5 billion in Jakarta were quite numerous in line with increased purchasing power. Supposedly such price limit was for the middle up category, not the luxurious category.

There was one foreign property company who defined super luxurious apartments in the luxurious class were accommodation priced above Rp. 55 billion per sq meter. Tax was imposed on units of 3 bedroom measuring 170m2 – 350 m2 and price per unit around Rp. 9.5 billion – Rp. 22,7 billion.

In terns of supply, the number of Luxurious apartments in Jakarta in 2015 was only 1% of the total project of 146,304 units while in 2018 supply increased by 1% of total 79,503 units. In a condition where economy was not favorable, the new regulation did not automatically increase sales especially in the investor’s segment. End users would buy in any condition at all.

Even if investors buy apartment today, they would still wonder whether their investment would yield any continued income as desired. Although the new regulation breezed out hope, on other hand the re setting of limit of Rp. 10 billion overlapped with the standard Pph tax for the super-luxurious category of Rp. 5 billion. The standard was in fact lowered from RP. 10 billion this was written in PMK No.90/PMK/03/2015 stipulated in May 2015.

The re setting of lower-middle PPnBM tax for property would not have a significant impact especially when a number of developers were busy building low cost homes at the price of below Rp. 400 million. this segment was failure-proof in a situation where market was low because buyers don’t buy for investment but the motive was rather need for shelter.

Beside relaxation of taxes, the Government also set minimum property price of Rp. 10 billion for foreign buyers. To set minimum price of Rp. 1 billion was right so as not to trigger speculations. With depreciation of Rupiah, price of property in Indonesia would be cheap for foreign buyers.

To compare Indonesia with Malaysia and Singapore, the standard minimum price of Rp. 10 billion was quite accountable. However, at the same price, the margin of the said price in Indonesia was higher considering the high price of land in Malaysia and Singapore.

Property Consultants believed that the standard minimum price of luxurious property for foreigners of Rp. 10 billion strengthened Indonesia’s competitiveness internationally. Meaning the price matched that of other countries. Price of middle class property in China, Malaysia and Thailand was around USD 400,000 – to USD 600,000.- per unit. Based on the USD – Rupiah exchange rate of Rp. 14.000 per USD, the selling price in Rupiah would be between Rp. 5.6 billion and Rp. 8.4 billion per unit.

In view of the average price in those countries, the minimum price of Rp. 10 billion per unit for foreigners was rated as quite reasonable; but some people believed the ideal standard price was Rp. 5 billion because not all of the foreigners were wealthy.

The price of above Rp billion was quite attractive and affordable to foreigners. So far the Government was still firm that only foreign citizens who were domiciled in Indonesia were allowed to own property. Assuming that foreign workers in Indonesia numbered 70,000 workers, then the supply for such apartments would be 70,000 units.

Assuming that foreigners who were interested numbered only 10% they only absorbed 10% of supply. In this case foreign buyers asked for free flow and free for all condition. Meaning consumers were free to sell, transfer, rent or will the property. Further more the buyer needed not be hindraced by the case of stay permit, work permit and length of stay in Indonesia.

Spontaneous response from the Government. The Ministry of Land Administration and National Land Board stated that the Government would extend permanent stay permit for foreign citizens under certain conditions. The status of possession given to foreign citizens was the Right to Use, not the Right to Own.

However the Government guaranteed that the extention of Use Permit would be made easy and the Legal Right to use would be well guaranteed. By Investor-friendly Policy and consumer orientated policy it was believed that the prospect of property would in the future be brighter amidst economic slowdown today. The rising property sector would demand supply for energy like gas and electricity, cement, concrete, iron and steel, furniture etc which means multiplier effect to national economy. (SS) 

Business New - September 30, 2015