The Indonesian investment real estate market can bring a company or investment fund from 10% per annum net
According to Statista, by 2025, the volume of the real estate market in Indonesia will reach a value of 9.16 trillion US dollars. Russian companies and investment funds are eyeing this region as potentially attractive and highly profitable for asset diversification, but they do not know what nuances they may encounter. In this article, I will tell you how investment funds can protect themselves as much as possible during a transaction and earn money.
Investment strategies
There are two possible investment options for the b2b sector in the Indonesian real estate market:
— wholesale purchase of commercial or residential space;
— partner development: an investment fund enters into a share of a development project as a co-founder or acquires land assets, and the developer implements the project.
— wholesale purchase of commercial or residential space;
— partner development: an investment fund enters into a share of a development project as a co-founder or acquires land assets, and the developer implements the project.
Risks for companies
The main risks for corporate investors are related to the registration of land rights and construction. In Indonesia, such forms of real estate rights as Hak Guna Bangunan (ownership right) and Hak sewa (lease right) are available to foreign investors.
Hak sewa. This is the investor's right to lease a land plot within the time period established by the contract, which is usually at least 25-30 years.
Hak Guna Bangunan. It is intended only for legal entities. According to the law, it is issued for 80 years and can be extended for the same period.
First, the investor receives ownership rights for up to 30 years, then it can be extended. In both cases, the minimum investment amount is $1700-2800 per square meter of real estate on this land.
Possible threats associated with the acquisition of land rights are the presence of double certificates, deceased owners whose relatives have not inherited, as well as the risks associated with the acquisition of land on zoned land (for example, in the "yellow zone", where the construction of hotels is allowed under a special separate license).
The risks associated with construction are the threat of unfinished construction multiplied by delays in project completion on the part of the developer and subsequently seasoned with the lack of a legal right to rent out real estate on a daily basis.
Hak Guna Bangunan. It is intended only for legal entities. According to the law, it is issued for 80 years and can be extended for the same period.
First, the investor receives ownership rights for up to 30 years, then it can be extended. In both cases, the minimum investment amount is $1700-2800 per square meter of real estate on this land.
Possible threats associated with the acquisition of land rights are the presence of double certificates, deceased owners whose relatives have not inherited, as well as the risks associated with the acquisition of land on zoned land (for example, in the "yellow zone", where the construction of hotels is allowed under a special separate license).
The risks associated with construction are the threat of unfinished construction multiplied by delays in project completion on the part of the developer and subsequently seasoned with the lack of a legal right to rent out real estate on a daily basis.
How corporate investors can protect themselves
In case of risk of getting an unfinished object: enter into a share with the developer on such terms that in case of violation of the agreements, the company could terminate the contract and change the unscrupulous developer.
It is important to know: if an investment company enters into a project in square meters, then in case of unsuccessful cooperation with the developer, it has the right to take away real estate in the amount of investments. In fact, this is the legal nature of a loan secured by property.
A bank can act as protection from the developer, especially investment-attractive projects are guaranteed by the National Bank of Indonesia, and in case of unfinished construction, the investor will receive finances.
It is also a common practice to request a legal opinion and tax opinion from the developer at the initial stage of determining risks.
It is important to know: if an investment company enters into a project in square meters, then in case of unsuccessful cooperation with the developer, it has the right to take away real estate in the amount of investments. In fact, this is the legal nature of a loan secured by property.
A bank can act as protection from the developer, especially investment-attractive projects are guaranteed by the National Bank of Indonesia, and in case of unfinished construction, the investor will receive finances.
It is also a common practice to request a legal opinion and tax opinion from the developer at the initial stage of determining risks.
From our practice. We only had one controversial case, because we carefully check the development companies. In 2024, one of the developers did not fulfill the terms of the contract. And we managed to return the investment in full in the amount of more than $ 300,000.
Result
Since investment risks are variable, every company needs a reliable partner located directly in Indonesia. He will provide not only a competent risk assessment and full legal support, but will also be an effective link in dialogue with Indonesian developers and authorities at any level.
For example, foreign companies are not familiar with all the legislative nuances and do not know that it is absolutely legal to reduce taxation.
Source: https://secrets.tbank.ru/blogi-kompanij/investirovanie-v-nedvizhimost/?internal_source=copypaste
© Business Secrets
For example, foreign companies are not familiar with all the legislative nuances and do not know that it is absolutely legal to reduce taxation.
Source: https://secrets.tbank.ru/blogi-kompanij/investirovanie-v-nedvizhimost/?internal_source=copypaste
© Business Secrets