• Investing in Indonesia REITs: The Complete Guide

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    Indonesia is currently one of the most interesting investment destinations in Asia and set to become a regional powerhouse.

    In previous years, many foreigners have been standing on the sideline, waiting for the market to open and ownership regulations to become more relaxed.

    Fortunately, the government plans to make real estate ownership more accessible, something that could benefit the market significantly.

    Besides, even if there are fewer REITs available in Indonesia compared to countries like Singapore, we will probably see an introduction of more trusts in the coming years.

    Topics covered in this article:

    • Can foreigners buy REITs in Indonesia?
    • How can I start buying REIT units in Indonesia?
    • What are the benefits of buying REITs in Indonesia?
    • List of REITs in Indonesia

    Can foreigners buy REITs in Indonesia?

    This is not a yes or no question but depends on what residential status you have in Indonesia.

    Indonesia is infamous for having strict foreign ownership regulations, something that applies to the property market as well.

    The government understands what impact current restrictions have on the economy, a reason why there have been discussions to allow foreign ownership.

    If you’re a non-resident foreigner, there are ways to get access to the Indonesian stock market.

    You generally have two options:

    • Buy Exchange Traded Funds (ETFs) on international stock exchanges, such as the New York Stock Exchange where you have currently three Indonesian ETFs available
    • Invest in Indonesian stocks or REITs through a local Indonesian broker on the Indonesian Stock Exchange (IDX)

    As there are no Indonesian REITs available on international stock exchanges, your only option is to open a local brokerage account.

    How can I start buying REITs in Indonesia?

    As mentioned, to trade stocks and REITs, you have to live in Indonesia and have a resident permit, referred to as KITAS.

    You’ll also need a tax number (NPWP), without these documents, it’s practically impossible to open a local securities account with a brokerage firm.

    Keep in mind that the requirements differ between brokerage firms. Therefore, it can be worthwhile contacting a handful of firms to get more details about their specific requirements.

    Brokerage Firms in Indonesia

    At the moment, there are 97 stockbrokers in Indonesia that you can read more about on the Indonesian Stock Exchange’s (IDX) website.

    Examples of brokerage firms are:

    • Harita Kencana Sekuritas
    • Kiwoom Sekuritas Indonesia
    • Shinhan Sekuritas Indonesia
    • UOB Kay Hian Sekuritas

    It’s recommended to work with a larger broker that has a reputable track-record and long experience of helping foreign investors. This will minimize the risk of coming across brokers that don’t serve your best needs.

    The process to Start Buying Securities

    After you’ve found a suitable broker, the first step is to open a local securities account.

    Normally, the following documents are needed:

    • A copy of your passport
    • Filled in application/agreement document from the broker
    • Tax number

    You also have to pay the deposit to the broker and the amount varies, but let’s use USD 5,000 as an example. You will also receive approval to open the account.

    Opening a Bank Account

    The same as it goes when buying stocks and REITs in Malaysia, you also have to open a local bank account. Your broker will most likely recommend one or more banks that they work with. Below you can find a handful of banks that cater to foreign investors:

    • Bank Mandiri
    • Bank Negara Indonesia
    • Bank Danamon Indonesia
    • Bank Central Asia Tbk (BCA)

    Even if some banks might allow you to open an account as a non-resident, many banks require that you have a resident permit.

    Documents typically needed:

    • Residence Permit Card
    • Passport
    • Letter from Employer / Permanent Residence License
    • 4 X 6 Photographs

    Some banks also request account-openers to provide additional documents as follows:

    • Bank document from your country of origin
    • Residency contract / proof of residence
    • An existing credit or debit card
    • Your spouse’s government-issued ID
    • Domicile letter

    What are the benefits of buying REITs in Indonesia?

    The 21st century is referred to as Asia’s century. China will lead the pack but Indonesia will be the main driver of Southeast Asia’s economy.

    In fact, its economy is already Singapore’s, and the stock exchange is set to become the largest soon.

    As Indonesia has vast plans to further open its market to foreign investors, I do believe that Indonesia is the most interesting country along with Vietnam in Southeast Asia.

    Even if there’s a limited amount of REITs available, more REITs will most likely be introduced in the future. Below I have listed some of the benefits associated with investments in REITs, not only in Indonesia but in other markets like Thailand and Singapore.

    1. Market access

    Investing in REITs is as easy as buying stocks and gives you access to global markets. Even if it’s comparably difficult to invest in Indonesian REITs at the moment, I bet that more REITs will be launched in the coming years.

    If you believe that there are too many limitations to buy REITs in Indonesia, you can also check REITs in developing countries and where the US and Singapore are just a couple of examples.

    2. Overcoming foreign ownership restrictions

    In addition to the low minimum capital required, overcoming foreign ownership regulations is one of the main reasons why REIT investments are so popular.

    REIT managers are experts and invest in everything from high-performing shopping malls to industrial real estate, depending on the REIT.

    Commercial real estate is often beyond the reach of foreign investors due to the complexity or market regulations, along with the high initial capital required.

    If you invest in REITs, you can own a corner of high-end units in strategic and central areas of metropolises.

    3. Substitute for owning real estate

    Owning physical real estate can be time-consuming as you have to visit the property from time to time, manage tenants, maintenance, and be subject to multiple tax obligations.

    You see, Indonesia even required that you have the country as your domicile in order to own property there. This is a great concern to people who work in Indonesia temporarily or don’t live there at all.

    In short, REITs are a great substitute for owning physical real estate as you can let someone else take care of the units for you.

    4. Liquidity

    REITs are liquid in the sense that you can buy and sell your shares with just a click. This is not the case of physical real estate where you have to engage in lengthy negotiations and transfer processes.

    REITs also help you to diversify your portfolio as they keep several units under their umbrella. This is not the case if you invest in one unit and you will rely on rental incomes from that sole unit only.

    5. Generally offer good dividend yields

    REIT managers are experts in real estate and can select high-income generating assets. REITs are well-known for generating high dividend yields that you can earn passively.

    List of REITs in Indonesia

    There are only two REITs available in Indonesia at the moment. Let’s review both of them.

    DIRE Simas Plaza Indonesia

    DIRE Simas Plaza Indonesia was issued in 2019 and currently has four properties under its portfolio. The units include:

    • Grand Hyatt Jakarta
    • Plaza Indonesia Shopping Center
    • The Plaza Office Tower
    • fX Sudirman

    Grand Hyatt Jakarta was finished in 1991 and is a 5-star hotel with 28 floors that has won many hospitality awards. Plaza Indonesia Shopping Center was finalized in 1990 and has almost 114,000 square meters of gross area.

    The Plaza Office Tower is a 34-floor premium office building launched in 2009 with a gross area of 70,880 square meters. fX Sudirman, on the other hand, is a mall situated in Southern Jakarta and was finalized in 2008.

    REIT unit owners enjoy dividend payouts semi-annually.

    The REIT fulfills the regulations of REITs which means that 80% of the net asset value is invested in real estate units while a maximum of 20% is invested into related real estate assets.

    DIRE Bowsprit Commercial and Infrastructure

    DIRE Bowsprit Commercial and Infrastructure is a subsidiary of PT Lippo Karawaci Tbk (LPKR).

    It’s the biggest property company in terms of total assets and revenue, market capitalization, with a unique and integrated business model in Indonesia.

    The company has five units under its portfolio, including:

    • Menara Matahari (office / apartments)
    • Life Tower (office / retail / residential)
    • Berita Satu Plaza (office/commercial)
    • Menara Asia (office)
    • DC Balaraja (distribution/supply chain)

    That’s it for this article! If you have any other concerns or questions, feel free to write a comment below.

    Disclosure: This information is intended for educational purposes. It does not constitute investment advice and should not be considered as a recommendation for investment. The writer of the article and the owners of the website don’t own any of the securities/REITs mentioned in the article. Note that the value and income of investments can go up, as well as down (resulting in a loss).

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