Bali Property Market trend 2023 – 2024
The Bali property market trends is undergoing notable shifts as we move through 2023 and into 2024. With occupancy rates stabilizing around 59% and slight increases in property values, the market reflects both opportunities and challenges. Factors such as rising entries into Bali and evolving investor strategies are shaping the landscape. However, questions remain about whether current and upcoming developments will meet future demand. Understanding market dynamics, regulatory changes, and regional alternatives like Lombok and Phuket is essential for navigating investment decisions effectively. How will the Bali property market trends go in 2024? The year has started, and we still hear a few different approaches to looking at the property market. Some real estate agents try to push other destinations, but we have also promoted other areas such as Sumba. But how is this market going now? After reviewing the number for 2023, the occupancy rate for 2023 and the beginning of 2024 is still under the occupancy rate of 2022. The value in USD is slightly higher. Two main factors: However, the revenue at the beginning of 2024 seems to be the same as in 2022. It seems that the number of entries did not follow the property investment done in the last few months. The average of the occupancy rate is stabilising at 59%. Bali seems to have reached a point in July or August 2023. The question is now to know if the person who has invested in 2023 and is currently building will be covered in 2024. Make navigating real estate in Indonesia easy Save time and money by letting ILA’s team of experts guide your real estate journey in Indonesia. We can help with due diligence, land title transfers, notary services, contract drafting and reviewing, building permits, various licences and more. Find more information about our broad range of real estate services, or reach out today for a free consultation. Lombok an alternative? While some are trying to place Lombok on the master plan, we can notice that the occupancy rate was similar to Bali, but with a very low occupancy on average of around 30%. Lombok seems not for now to be the expected market that some promoters try to promise. However for investors with a premium location and a good strategy the place can be interesting to look at. The election in a few months will determine the future of the next few years. While the country is taking a different direction, social factors have a strong influence on how and where people want to spend their money and vacation. Is Thailand better? By continuing our analysis we started to take a look at the numbers in Phuket, Thailand. Phuket seems to have a higher occupancy rate at its peak but is more affected by the variability of the seasons. Phuket has had a lot of construction in the last few months, and the occupancy rate seems also affected by the number of constructions increasing faster than the demand. Where to invest? Bali and Phuket or Lombok will see a lot of new construction finalized in the next few months following the purchase or lease of the last few months. The question is to now identify if the demand will follow or not. In a long time, there is no doubt that this demand will continue. Spain had this issue in the past and Asia has a strong domestic market to come. However, the incertitude is never good for an investor. Politics have to continue to improve infrastructure and send good signals to travelers willing to invest and occupy those properties. A few weeks back, I remember having a discussion about investing in Bali and France. An interesting fact is that Paris has a higher occupancy rate than Bali, despite what we could expect. With 75% compared to 59% in Bali, Paris seems a place where stability of the tourism industry is for example guaranteeing a certain level of revenue to the investor. Indonesia has a strong potential. The location of the investment is key. We do trust that it is the right moment to invest, but knowing how to do it is the key Also read: How to Buy a Property in Bali?
How to get a building permit in Indonesia?
When investors buy a property for a business or personal use, the building permit in Bali and the rest of Indonesia becomes a crucial part for some businesses. Restaurant Hotel Manufacture Residential and Airbnb Retail shop Etc The above businesses need to get what is called a building permit. The building permit in Indonesia is one condition to be able to apply for some licence and run a business. In addition, the building permit can be applied under some conditions if the zoning of the land is in line with the purpose of the business. What are the requirements and steps to get a building permit? Indonesia has a law and regulations for buildings authorized to be built. Namely Building Construction Permits (IMB) have been superseded by a Building Construction Approvals (PBG) by the Indonesian government. PBG is a licence to construct new buildings or change the purpose and technicality of existing structures. This is mentioned in Article 1, paragraph 17 of Government Regulation Number 16 of 2021 about Implementing Regulations of Buildings Law Number 28 of 2002 (Regulation 16/2021). IMB versus PBG/SLF While IMB was a permission that the owner had to get before or during the construction of a building, PBG is a licensing requirement that governs how buildings must be constructed. The concerned technical standards include building planning and design, building implementation and supervision, and building utilisation. Apart from that, a Certificate of Worthiness (Sertifikat Laik Fungsi/SLF) is a certificate the government grants to the owner of a building or its representative. It is a statement that the building is functionally fit for purpose and can be used properly according to plan. The current global trend demands better public services in the digital era and it is a challenge for the bureaucracy to adapt to a rapidly changing external environment. The Building Management Information System (SIMBG) is one of the licensing services that offer digital services. It is very common in some areas to hear investors getting a SLF before a building permit (PBG). TO BE CLEAR the law reinforces that you need to apply for a permit before the SLF and get your IMB. Some practices to get the SLF before the PBG are not correct and recommended. Some control can be done and performed and conducted to the demolition of your building. Where to apply? The regulation 16/2021 stipulates that the application of PBG and SLF can be made through the Building Management Information System (Sistem Informasi Manajemen Bangunan Gedung/SIMBG), which is organised by the Ministry of Public Work and Public Housing. Besides Processing PBG and SLG, SIMBG is also used to apply for other building-related permits including: Building Ownership Certificates (Surat Bukti Kepemilikan Bangunan Gedung/SBKBG); Technical Demolition Plan (Rencana Teknis Pembongkaran Bangunan/RTB); Other building data/information. Make navigating real estate in Indonesia easy Save time and money by letting ILA’s team of experts guide your real estate journey in Indonesia. We can help with due diligence, land title transfers, notary services, contract drafting and reviewing, building permits, various licences and more. Find more information about our broad range of real estate services, or reach out today for a free consultation. How much building permit in Indonesia cost? The cost of the building permit has to be separated in 2 aspects: New building Building built more than 2 years ago While the building built more than 2 years ago just need an SLF, the new construction needs to apply for the PBG before starting to build and also need to follow the new procedures. The cost of the building permit is variable and depends on the size of the building and the service fee of the agent applying for it. The processes to obtain the PBG can take several months and have a few back and forth between the government and the architect to revise the original plan. To limit costs, consult a local architect to ensure the design and construction meet requirements related to land occupancy, roof type, and other regulations. For a villa with two or three bedrooms, the PBG cost will add a few thousand dollars, so include it in your construction budget to avoid unexpected expenses. The official retribution of 50,000 IDR to 70,000 IDR is only a small part of the total cost, as additional permits from Dinas must also be obtained. The SLF costs less than the PBG, provided the PBG has already been approved. However, an SLF for a new building without a PBG is illegal and cannot be legally issued. Building Construction Approvals (PBG – Building permit in Indonesia) A PBG can only be issued if the building technical standards determined by the Central Government or the relevant regional government are met. For this purpose, Regulation 16/2021 provides a detailed list of the technical requirements which must be satisfied which includes those that apply to the following. Requirements the planning and design of buildings; the construction and supervision of buildings; the utilization of buildings; the demolition of buildings; the requirements apply to cultural heritage buildings (Bangunan Gedung Cagar Budaya or BGCB); the requirements apply to buildings for special functions (Bangunan Gedung Fungsi Khusus or BGFK); the requirements apply to green buildings (Bangunan Gedung Hijau or BGH); the requirements apply to state buildings (Bangunan Gedung Negara or BGN); the documentary requirements; and the requirements apply to parties involved in the construction of a building. For the construction of a building, the building owners must engage a group of building service providers, including a construction planning services provider (penyedia jasa perencana konstruksi), a construction services provider (penyedia jasa pelaksana konstruksi), and a supervision services provider (penyedia jasa pengawasan) or construction management services provider before commencing construction.The construction planner services provider must prepare and submit a technical plan to the authorities through the SIMBG when applying for a PBG. Upon receipt of the application Authorities will assess the architectural plan documents and the structural, mechanical, electrical, and plumbing plan documents.If the technical documents meet all requirements, the relevant technical agency in charge
How can a foreigner run a Hotel or a villa on Airbnb in Bali and Indonesia?
Bali has been, since the end of the COVID-19 pandemic, attracting foreigners and Indonesians looking for property investment and opportunities, particularly in relation to the villa license Bali. When it comes to purchasing property, the answer is clear: Yes, a foreigner can buy a villa in Indonesia. However, if the question is whether a foreigner can operate a villa on Airbnb in Bali and Indonesia, especially under the villa license Bali, the answer requires a more detailed explanation. Officially, foreigners are not permitted to run a short-term rental business in Indonesia under their own name. This restriction is not unique to Indonesia – many countries require a tax ID for locals to run a business. Misinformation suggesting otherwise is not only misleading but can lead to legal complications. Our experience as an investment and legal advisory company includes assisting clients who have encountered issues from operating without the proper licence. Hotel Licence The Indonesian regulatory landscape is dynamic, making it challenging for investors to understand the property market in Bali and Indonesia. Foreigners are allowed to operate short-term rentals under a hotel licence, provided they have invested in a company that can hold such a licence. However, Indonesia permits foreign ownership and operation of a hotel only if the land area exceeds 4,000 square meters. The licence will be classified as either Hotel Melati or Hotel Bintang. For smaller land sizes, Indonesian companies without foreign capital are eligible for these licences. For properties with less than 4,000 square meters, alternative solutions exist, and we’re available to discuss these options. Obtaining the licence under the company is one part of the process. Once the company has been established and the licence applied, the company has to follow a process of verification and inspection and apply for additional licence regarding the following points: Safety training Standard operating procedures Proof of laboratory test results resulting from Compliance with Environmental Health Quality Standards (SBMKL) Location and Building Plans of Business Places Business Licensing from the Ministry of Tourism and Creative Economy Certificate of capacity building/training for accommodation cleaners (cleaning service) Food handler training certificate related to food hygiene and sanitation As a foreigner or investor you often hear ” It is OK, it will be fine, no problem”. This kind of affirmation is usually a warning for investors. Indonesia has rules and regulations. You are fine until the regulation changes or somebody starts to make some report. As an investor having professional advice on how to set up a hotel in Indonesia is crucial. Registering a company in Indonesia has never been easier Setting up a business abroad can be challenging with so many documents, laws and regulations to consider. Luckily, the process will be a breeze, and we’ll give you expert advice on which business structure and setup will fit your needs. Reach out to the ILA team today to set up a free consultation or read more about the company registration process. Pondok Wisata and Vila License Pondok Wisata This licence is normally issued for business owners living on the property and looking to get extra revenue from their place. There is a limitation on the number of rooms. The Indonesian law defines this licence as businesses providing lodging services to the public with daily payments made by individuals using residential buildings occupied by the owner and partially used for rental by providing opportunities for tourists to interact in the owner’s daily life. Per definition this licence is not for foreigners and cannot be applied by a foreigner or an Indonesian company with 100% ownership. As the hotel licence owners have to respect some criteria in terms of Hygiene and safety. If Pondok Wisata is not the most appropriate licence, which licence foreigners can legally use to rent their villa on Airbnb? Vila License The regulation defines the villa license Bali as businesses providing lodging services to the public, which are private houses. In this arrangement, the tourists use the facilities, and the owners manage the property themselves. Moreover, the interesting point of this licence is that the owner itself is authorised to manage and rent the facility. Since the ownership of a villa or property can be a PT PMA (foreign-owned company), the licence holder has the right to generate income with this licence. Airbnb and other platerform are increasingly checking and reporting revenue, asking for licensing as well. It is forbidden for local and foreigners to rent out a property or villa in Indonesia without a business licence. There are some possibility to delegate a licence to a company but in any case a foreign company or a property management company can get a direct revenue of a property without processing the licence. As a foreigner you would be exposed to important consequences. It is important to always check which income is promised to you. Now that we know which licence is necessary, how to get the licence? How to open a company in Indonesia? Setting up a company in Indonesia In general, foreign investors can set up a company in Indonesia and own land with it. Specifically, in the context of the villa license in Bali, by owning land, we define full ownership and not leasehold. Additionally, it is important to remember that transferring a lease is illegal and not recognized by Indonesian law. Furthermore, a lease is essentially a rent for a longer period, and the lessee has no rights over the property except for its use, and cannot sublease something the lessee doesn’t own. Companies can own a freehold with a building on it or not building on it. The purpose of this article is not to provide all the steps. We do have an article on the company setup here. However setting up a company in Indonesia is fast 3 days to 1 week and allow you to: Own a property Having the proper licence (Hotel, Real Estate, Property management) and make your income legit Optimise your tax (check our article on tax) Avoid your
Is Bali a Bubble About to Explode?
In the past few months, I have engaged in lengthy discussions with clients, investors, and professionals, all inquiring about whether the Bali property market is on the verge of an explosive bubble. Assessing this appreciation is challenging, as every market is difficult to evaluate and each stakeholder has their own perspective. Investors are seeking reassurance about their investments. Real estate agents, promising a 25% return on investment (ROI) to sell properties with a limited lifespan. Agents dealing with visas for new resident Notaries having interest in a successful transaction. Developers with large investment engaged Naturally, most actors adapt professional advice to their clients and offer services in the best interest of their clients. As an investor with a financial background, I consistently view a property market as defined by demand and supply, with various variables, much like any other market. Read also : How to Buy a Property in Bali? The Offer in the Bali Property Market: From Uluwatu to Canggu, Ubud, or East Bali, there has been a notable increase in property offers in recent years. Many Balinese have sought to sell or lease their land to generate cash during and after the COVID-19 pandemic. Interestingly, the most significant demand during this period came from Javanese buyers, capitalizing on the crisis to acquire land, while Balinese landowners were eager to liquidate their assets for cash. This trend flooded the market with leasehold or freehold properties, such as villas, land, and hotels. Other nationalities joined the trend, buying and developing properties to offer off-plan villas or land. As we approach the end of 2023, it’s time to evaluate the situation. The number of listings on short-term rentals in Bali has surged, reaching almost 58,500 listings on various platforms, marking a 22% increase. This trend has continued until the end of this year in 2023 and it is now time to assess the situation. If we take the number of listings for short-term rentals in Bali, no words can describe more than a graphic. Make navigating real estate in Indonesia easy Save time and money by letting ILA’s team of experts guide your real estate journey in Indonesia. We can help with due diligence, land title transfers, notary services, contract drafting and reviewing, building permits, various licences and more. Find more information about our broad range of real estate services, or reach out today for a free consultation. Is the demand keeping pace? Investors typically seek returns through short-term rentals, long-term rentals, or capital gains. Due to investors’ confidence in property occupancy, capital gains depend on rising land demand. A bubble occurs when the market experiences capital gains based solely on hope. It can burst if buyers perceive a lack of real demand or if there are no tax advantages for buyers. Current Demand Trends: Airbnb numbers tell a revealing story. The occupancy rate for 2023 is falling below that of 2022, with several factors contributing to this decline: People are less inclined to travel far from their home country. Savings need replenishing. Bali’s reputation as a crowded destination with high traffic is affecting its appeal, especially as other places offer better infrastructure Read also: Bali Property Market Trend 2023 – 2024 Property Occupancy Rates in Bali Property Occupancy Rate in Ubud Property Occupancy Rate in Canggu Area Canggu, in particular, shows a significant drop from over 65% to around 50% in occupancy rate. Despite a declining market trend, revenue took time to follow suit due to higher listing prices. Property owners with short leaseholds aimed for fast ROI by listing at premium prices when demand was high. However, a general trend of declining revenue is emerging, aligning with the total revenue of 2022. This trend indicates that revenue persists but is distributed among more listings with lower occupancy rates. In this competitive landscape, having a strong partner is crucial for differentiation. REVENUE OF BALI PROPERTY MARKET ON SHORT TERM RENTAL To Invest or Not in the Bali Property Market? The answer is both yes and no. We recommend clients formulate a robust business plan and thoroughly understand the location of their investment. Acquiring Freehold property (HGB or Hak Pakai) is crucial, especially in a downturn, as leasehold becomes a double penalty, losing value due to the market and having a shorter lease duration. Key considerations include: Always do a market study and study numbers (not the ones from the seller) Always understand your customers behaviour and their travel trends. A lot of promoters try to bring apartments on the market. Is Bali the place people want to stay in an apartment? Are clients going to fly out from New York to stay in an apartment? Understand the changes. India is becoming one of the biggest markets for Bali. Are Indians staying for 4 days or 2 weeks? Will they spend as much as in other markets? Will it be perfect to stay in a 5-star hotel, an apartment, or a villa? Make sure your contract is secured and you perform the correct due diligence. Is long-term rental another alternative? Can I look at the Indonesian market? Have a proper marketing strategy and property management company Bali will always be Bali. Indonesia is a strong market with an important local market. But Indonesia is more than Bali and offers a lot of new opportunities to develop sustainable forms of tourism. Sumba, Raja Ampat, and those islands on the east coast of Indonesia show that their occupancy rates can stay very high. Some resorts, such as Misool Eco Resort, are fully booked years in advance. Some resorts in Sumba also still have a strong occupancy rate that is increasing. How can you help me decide whether to invest or not in Bali or Indonesia? We can assist you in studying the market, providing insights, data, and recommendations. As investment and legal advisors, we offer comprehensive legal advice and assistance throughout your investment process to ensure your interests are protected. Investors should adopt a medium- to long-term perspective. Indonesia offers various submarkets
Navigating Bali’s Property Market – A Comprehensive Guide to Investing in Bali Real Estate
Bali’s allure transcends its breathtaking landscapes and vibrant culture. For many, it whispers the promise of a dream property, a haven of tranquility nestled amidst emerald rice fields or overlooking the azure expanse of the Indian Ocean. But before embarking on this exciting journey, navigating Bali’s unique land ownership laws and regulations is crucial for a smooth and secure investment. This comprehensive guide demystifies the complexities of Balinese property, offering vital insights on leasehold and freehold rights, unraveling due diligence procedures when investing in Bali real estate, and illuminating hidden gems – ensuring your investment journey is not just rewarding, but also well-informed. Understanding the Land Landscape: Leasehold vs. Freehold Unlike many countries, foreigners cannot directly own land in Bali. However, despair not! Enter the Hak Pakai, a long-term leasehold right granting you the privilege of possessing and enjoying a property for up to 30 years, with renewable options stretching for generations. This practical solution offers benefits for both investors and the environment, ensuring responsible land use and safeguarding Bali’s natural beauty. Choosing between Hak Pakai (leasehold) and Hak Milik (freehold) through nominee arrangements requires careful consideration of your long-term vision and budget. Here’s a breakdown to help you decide: Leasehold (pros and cons) More affordable: Requires a smaller upfront investment compared to freehold. Renewable: Offers the security of extending your lease beyond the initial 30 years, often with preferential renewal rates depending on the negotiation. Lower maintenance burden: Landowner typically handles major maintenance and repairs. No direct land ownership: You don’t own the land itself or the property itself, but rather the right to use and enjoy it. Potential rent increases: Leases may have clauses allowing for rent adjustments over time. Inheritance limitations: Leasehold rights are typically not inheritable in the same way as freehold property. Freehold (HGB or Hak Pakai) Full ownership: You legally “own” the land through a company Higher resale value: Offers greater potential for capital appreciation compared to leasehold. Inheritance potential: Can be passed down to heirs under specific legal conditions. Greater control: Provides more freedom in terms of development and renovations Possibility to leverage and get a mortgage to develop another property Higher upfront cost: Requires a significantly larger investment Maintenance responsibility: You are responsible for all maintenance and repairs on the land and property. Nuances and Considerations Beyond the basic framework, each option presents unique nuances to consider. For example, leasehold properties may have restrictions on certain types of construction or business activities. Conversely, nominee arrangements can be complex, requiring careful selection of a trustworthy trustee and ensuring clear legal documentation. Case Study: Finding Your Perfect Fit Imagine Sarah, a yoga enthusiast planning to open a retreat center in Bali. After careful research, she decides on a beautiful villa on freehold. She negotiates favorable terms and understands the potential for rent increases. With expert legal guidance, Sarah secures her dream property and takes the next step in investing in Bali real estate by using her first property as mortgage collateral to acquire a second one. After 4 years Sarah can now double her investment each time she refunds the mortgage by renting on AirBnb her properties. Make navigating real estate in Indonesia easy Save time and money by letting ILA’s team of experts guide your real estate journey in Indonesia. We can help with due diligence, land title transfers, notary services, contract drafting and reviewing, building permits, various licences and more. Find more information about our broad range of real estate services, or reach out today for a free consultation. Understanding Due Diligence for Investing in Bali Real Estate Due diligence when you investing in Bali real estate or Indonesia is your shield against hidden pitfalls. Here are some key steps to ensure a smooth and secure investment: Land Title Verification: Engage a reputable lawyer to verify the property’s land title, ensuring it’s free of encumbrances and held by a legitimate owner. Zoning Regulations: Understand the zoning of the land to avoid restrictions on your desired use of the property. Building Permits and Licenses: Confirm if necessary permits and licenses for construction or renovation exist, avoiding future complications. Environmental Considerations: Research potential environmental risks like flooding, landslides, or proximity to hazardous materials. Structural Integrity: Conduct thorough inspections to assess the property’s structural soundness and potential repair needs. Road access: Check if you have full right to access to your property Read also: Things to Know Before Investing in a Property in Bali Case Study: Paradise Lost – The Price of Skipped Due Diligence in Bali when buying a property The Dream: John, a globetrotting entrepreneur, stumbled upon a breathtaking cliffside villa in Bali. Lush greenery tumbled down to the turquoise ocean, and the whispering palms promised endless sunsets. He envisioned yoga retreats, art workshops, and a life dipped in island serenity. The price was a steal, the seller persuasive, and John, blinded by his Bali dream, rushed headlong into a purchase. Skipping Steps: In his haste, John neglected thorough due diligence. He skimmed the land title, ignored whispers of zoning issues, and didn’t bother with inspections. The seller’s charm and promises of “flexible regulations” were enough. The Nightmare Begins: Soon after moving in, the cracks started to show. Construction on a neighboring property blocked the ocean view, violating zoning regulations. Local authorities halted work, citing John’s lack of permits. His dream retreats became a legal nightmare. Hidden Costs: Inspections revealed structural issues, requiring costly repairs. The “flexible regulations” turned out to be costly bribes, draining John’s finances. The seemingly affordable price tag ballooned, leaving him with a property he couldn’t use and a mountain of debt. Lessons Learned for not doing a due diligence in Bali before investing a property: John’s Bali dream turned into a cautionary tale. His eagerness to own a piece of paradise overshadowed the importance of due diligence. His mistakes cost him dearly: Financial Loss: The hidden costs and legal fees spiraled, leaving John with a financial burden. Lost Time and Opportunity: Years were spent battling legal issues
REITs in Indonesia: From Concept to Market
Indonesia’s Real Estate Investment Trusts (REITs), officially known as Dana Investasi Real Estat Berbentuk Kontrak Investasi Kolektif (DIREs in Indonesia), are on an exciting growth trajectory. If you’re interested in tapping into this potential, understanding the process of creating a DIRE is crucial. Here’s a breakdown of the key steps, along with further insights into the Indonesian REIT landscape: What are REITs (DIREs) in Indonesia? Real Estate Investment Fund (REIT) is a container used to collect funds from the public or investors to be invested in real estate assets, assets related to real estate, and/or cash and cash equivalents. Meanwhile, the Infrastructure Investment Fund (DINFRA) is a container in the form of a Collective Investment Contract used to raise funds from the investor community to be invested mostly in infrastructure assets by the Investment Manager. Make navigating real estate in Indonesia easy Save time and money by letting ILA’s team of experts guide your real estate journey in Indonesia. We can help with due diligence, land title transfers, notary services, contract drafting and reviewing, building permits, various licences and more. Find more information about our broad range of real estate services, or reach out today for a free consultation. Conception and Planning of DIREs: Identify a Niche: Research market demand and choose a focus for your DIRE, such as retail, office, healthcare, or logistics. Analyze existing DIREs to avoid saturation in specific sectors. Assemble a Team: Gather experienced professionals in real estate development, finance, legal matters, and REIT management. Develop a Business Plan: Define your investment strategy, target properties, funding sources, and expected returns. Regulatory Compliance DIREs: Form a Legal Entity: Establish a corporation that will become the DIRE (REITS in Indonesia). Consult legal advisors to ensure compliance with Indonesian regulations. Obtain OJK Approval: File an application with the Financial Services Authority (OJK) for DIRE registration. This involves submitting detailed documentation about your business plan, financial projections, and team expertise. Meet REIT Qualification Criteria: Ensure your DIRE adheres to the minimum requirements, including: Investing at least 75% of assets in real estate or related assets. Generating at least 75% of gross income from rents, real estate sales, or mortgage interest. Distributing at least 90% of taxable income to shareholders as dividends. Capital Raising and Investment: Initial Public Offering (IPO): List your DIRE on the Indonesia Stock Exchange (IDX) to raise capital from public investors. This requires meticulous preparation and adherence to IPO regulations. Private Placement: Secure funding from institutional investors or high-net-worth individuals through private placement deals. This can be a faster route to market but may involve higher interest rates or stricter investment terms. Acquire Target Properties: Use the raised capital to purchase income-generating real estate assets that align with your DIRE’s focus. Conduct thorough due diligence and ensure property titles are clear. Ongoing Management and Operations: Establish a Management Team: Build a team with expertise in property management, tenant relations, financial reporting, and compliance. Maintain High Occupancy Rates: Implement effective leasing strategies and property maintenance to attract and retain tenants, ensuring steady income generation. Distribute Regular Dividends: Pay out at least 90% of taxable income to shareholders as dividends, fulfilling a key REIT requirement and attracting investors seeking regular returns. Ensure Transparency and Reporting: Maintain accurate financial records and prepare regular reports for shareholders and regulatory bodies. Beyond the Basics: A Deeper Dive into Indonesian REITs Government Incentives: The Indonesian government actively supports DIRE growth through tax benefits like double taxation exemption and simplified regulations. This creates a favourable environment for REIT development. Market Potential: Indonesia boasts a thriving economy and a burgeoning middle class, driving demand for diverse real estate sectors. DIREs offer investors exposure to this growth potential through various property types. Challenges and Opportunities: While the market is promising, liquidity concerns and limited diversification options remain challenges. However, government efforts to encourage broader sector representation and improve market depth are underway. Investment via a REIT Scheme Review Double taxation hurdle cleared for Indonesian real estate investors! The government recently made a big move, eliminating double taxation for anyone investing in property through a special program called the “Collective Investment Contract” (CIC). You can now invest in Indonesian real estate and keep more of your hard-earned money. Think of it like this: Imagine a group of friends wanting to buy a building together. Instead of each person buying directly, they pool their money in a joint account and appoint someone to manage it. The CIC does that for real estate investments, similar to REITs Indonesia. You join forces with other investors, combine your money, and reap the benefits of owning income-producing properties. Previously, investing this way meant paying taxes twice: once on your share of the profits and again on the group’s activities. But thanks to the new regulation, that’s no more! You keep more of your profits, making it a much more attractive option for investors. So, if you’ve ever dreamed of owning a piece of Indonesian real estate, now’s the time to explore the CIC program. It’s a simpler, more tax-friendly way to invest and potentially enjoy a steady stream of income from your property holdings. REITs Investment Limits Real estate assets, such as buying an office building and renting it out. Assets related to real estate, such as buying shares/bonds of property companies In the form of cash or cash equivalent Overview of prospective licenses and permits required to conduct business operations The creation of the DIRE-KIK and the transfer of the land and building assets into the DIRE-KIK involves the following steps: Establish DIRE-KIK; Appoint Investment Manager and Custodian Bank to manage DIRE-KIK and oversee and execute cash handling and payments, respectively Relevant parties, including Holdco to subscribe for units in the DIRE-KIK; Dire-KIK uses the funds to acquire: The shares of existing companies owning the land Establish its own PMA company, inject the funds into the PMA, and the PMA company acquires the land and building assets. The Benefits and Disadvantages of Reits in Indonesia Investing in REITs certainly has