Bali beckons as Indonesia makes it cheaper for overseas investors to buy expensive houses by raising luxury tax threshold

Bali, Indonesia’s top tourist destination, is poised to attract overseas buyers after the government recently raised the threshold on luxury tax, according to analysts.

In June, the administration of President Joko Widodo announced that the limit for luxury tax of 20 per cent for houses and flats would be increased to 30 billion rupiah (US$1.4 million) from 20 billion rupiah, effectively excluding many transactions in the high-end property market.

Jakarta already allows foreigners to own landed property on a 30+20+30-year scheme. Foreigners are initially allowed to own the property for 30 years, with a subsequent extension of 20, followed by another 30 years.

Indonesian developers, however, are pushing for an upfront 80-year permit for foreign homebuyers. Previously only Indonesian citizens could own land titles.

“This is a big change,” said Georg Chmiel, executive chairman at Juwai.com, a Chinese website for buyers overseas property. “Foreigners have the right to possess property for up to 80 years and are much less likely to pay 20 per cent sales tax when selling. We expect demand to increase.”

The relaxed rules reflect Widodo’s goal, who was re-elected for a second term in May, to attract more foreign investment into the country to fulfil his election promise to boost Indonesia’s economic growth to 7 per cent annually from about 5 per cent currently.