Indonesian property sector to get a boost from these government incentives

These include a waiver of the 10% VAT on property sales under IDR2 billion.

According to Colliers, the government is aiming to carry out vaccinations for around 181.5 million Indonesians from January 2021 to March 2022. The hope is that this will create herd immunity and the economy will gradually recover, which should have a positive impact on the property market. 

The Indonesian government has implemented several short-term incentives to boost the property sector, including a waiver of the 10% VAT on property sales under IDR2 billion, and a 50% waiver on property sales above IDR2 billion to IDR5 billion, valid from March to August 2021. If successful, this could be extended; however, it applies only to existing inventory. 

Here’s more from Colliers:

In addition, Bank Indonesia has implemented loan to value financing of 100 percent from March 1 to December 31, 2021, though underwriting guidelines remain challenging. The office and apartment markets remain oversupplied and transaction activity is weak. Many office tenants are downsizing and renegotiating rentals and lease terms. Staycations are helping prop up hotel occupancy rates. Shopping mall hours and occupancy rules have been relaxed amid lower COVID-19 infection rates. More property developers are defaulting on loans or facing increased creditor claims, including bankruptcy proceedings.

Forecast

The implementation of the Omnibus Law is expected to become a key driver that will strengthen purchasing power, increase market confidence and encourage investment in the property sector. The retail sector is predicted to start moving towards recovery in the second half, but this depends on the success of the vaccination programme. The new Minister of Tourism and Creative Economy, Sandi Uno, is pushing several initiatives including the conversion of USD10 billion per year typically spent by Indonesians on overseas tourism into domestic tourism revenues; a long-term visa policy that would allow foreign tourists to stay in Indonesia for up to five years with a deposit of IDR2 billion or above, and possibly allow investment in property; and opening international tourism in Bali through a travel corridor planned in summer 2021.