Saturday, September 18, 2010

House Hunting in ... Indonesia

Thursday, September 16, 2010
By VIRGINIA C. McGUIRE, The New York Times



This property, consisting of six structures with a total of six bedrooms and seven baths, is a few miles north of the village of Candi Dasa on Bali's east coast. The main living space, completed in 2008, is an open-air pavilion facing the water, with a living room on the top floor and a dining room below. Bamboo screens can be lowered to protect the space from rain. The master suite, a separate structure adjacent to the main pavilion, has a bedroom, a sitting area and two bathrooms; all the rooms have views of the ocean and Bali's tallest mountain, Gunung Agung.

Two guest cottages, each with one bedroom, are nearby. Antique salvaged wood is used throughout most of the property. The roofs are thatched and sweep upward at the front and back, an architectural style from the Minangkabau culture of Western Sumatra, another island in the Indonesian archipelago.

The property also has two modern villas, one with one bedroom and one with two. Water features on the property include a swimming pool, a river and a shallow manmade lake with lily pads and water birds. The furniture is included in the sale.

All beaches in Indonesia are owned by the state, but this remote beach is rarely visited by outsiders. The waves are suitable for surfing, and fishing boats pass in front of the property. The island of Lombok is visible in clear weather.

The nearest market is five minutes away in Amlapura, and restaurants and hotels in the tourist town of Candi Dasa are 15 minutes away. It takes about two hours to drive to the airport in Denpasar, but a highway currently being built is expected to cut travel time.


The market in Bali for properties costing more than $750,000 faltered a bit during the economic downturn, said Jeffrey Kam, Knight Frank Indonesia's Jakarta-based residential director.

Matthew Georgeson, a partner at Elite Havens, a real estate firm in Bali, said the lack of financing for foreigners in Bali's property market had helped insulate it from the credit crunch. Mr. Kam estimated that the cost of vacant land in Bali had risen 20 percent over the past two years, especially in the villages of Bukit, Uluwatu and Ungasan, where recent hotel developments have attracted investors. He said the thriving tourism industry in Seminyak was also pushing prices up there.

Besides Bali, expatriates are most likely to live in the capital city, Jakarta, because of its business community. Mr. Kam says a typical apartment for a foreign business person in Jakarta costs 15,000,000 to 25,000,000 rupiahs per square meter ($155 to $258 per square foot, at 9,000 rupiahs to the dollar).

A 4,800 square-foot house with high-quality finishes and a quarter-acre of land in a popular tourist area costs about $1 million, Mr. Georgeson said. The property here is priced well above the average villa because of the quality of the architecture and because it is extremely rare to find a six-acre oceanfront estate.


Bali's foreign buyers are more likely to be expatriates, Mr. Georgeson said. Such buyers come from other Asian countries, as well as Australia, France and England. "It really is the United Nations of buyers," he said. According to Mr. Kam, the country's immigration records show an increase in visitors from China and Russia recently.


It is illegal for foreigners to own property in Indonesia, although Mr. Kam said the government was considering loosening the rules.

In the meantime, according to Mr. Georgeson, there are two common ways around the constraints. The first, getting a right-of-use certificate from the government, involves paying higher taxes. The other is finding a "nominee," an Indonesian citizen who will hold the title. "If you want to control the title," Mr. Georgeson said, "you've got to use a nominee."

The foreigner obtains a long-term lease on the property, often placing a lien on the title so the nominee won't have the power to sell without consent. Mr. Georgeson says that although many regular visitors to Bali use trusted local friends or employees as their nominees, there are also notaries who offer professional nominee services.

The government charges a transfer tax when property changes hands. Mr. Georgeson said the buyer pays 5 percent of the assessed value, which in Bali is much lower than the market value. Ultimately the transfer tax is usually 1 or 1.5 percent of the purchase price.

Other transaction costs include a 1 percent notary fee. Mr. Georgeson describes the notary as a government agent who acts for both parties. Hiring a private lawyer is optional but recommended. Lawyer fees usually run 0.5 to 1 percent of the purchase price.

Most properties are priced in United States dollars, and Mr. Georgeson says it is not uncommon for properties to be offered for sale without public announcements. In such cases, the services of a real estate agent are crucial. Land is usually priced in rupiah.

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