Published on and written by Cyril Jarnias
Indonesia: New vs. Old Real Estate Investment
Indonesia, with its rapidly evolving economic landscape, offers a fascinating arena for the debate on real estate investment, where the choice between purchasing new and old property raises crucial questions.
This data-driven match highlights market trends, price differences, and the long-term impacts of purchasing options in various regions of the country.
Good to know:
While new properties promise modern construction standards and state-of-the-art amenities, older buildings often appeal with their unique character and strategic locations in established neighborhoods.
Exploring these dynamics allows not only an understanding of the financial and practical stakes associated with each option, but also an appreciation of how they shape real estate choices in one of Southeast Asia’s most dynamic economies.
Cost-Benefit Analysis of New vs. Old Real Estate in Indonesia
Key Costs Associated with Investing in New Real Estate
- Purchase Price: The price per square meter for new properties varies greatly by location (e.g., between €2,500 and €3,500/m² in Seminyak for high-end, or between €1,800 and €2,500/m² in Canggu).
- Construction and Development Costs:
- Higher initial cost but generally little to no renovation needed.
- Fees related to administrative procedures and local permits.
- Associated Taxes:
- Taxes on new properties are sometimes reduced thanks to local tax incentives (temporary exemptions or reductions on registration fees in certain tourist areas).
- Mandatory notary fees.
- Other Fees: Payment in IDR, potential currency conversion, ancillary fees (property management if rental investment).
Potential advantages of new builds:
- Modern technologies integrated from the design phase (home automation, advanced security).
- Superior energy efficiency: recent thermal insulation, sustainable materials.
- Builder warranties covering structural defects during the initial years.
- Low maintenance costs initially.
Comparison with Old Real Estate
| Criterion | New Real Estate | Old Real Estate |
| Price/m² | Higher | Often lower |
| Renovation | Rarely needed | Sometimes essential |
| Maintenance Costs | Low initially | Higher |
| Taxes | Locally reduced possible | Full transaction taxes |
| Warranties | Builder included | No warranty |
Specific costs for old properties:
- Attractive price in less popular neighborhoods (from ~€1,200/m² depending on region).
- Frequent renovations needed: structural/electrical/plumbing (~€300–600/m² additional).
- Increased ongoing maintenance due to tropical climate (humidity/termites).
Potential benefits of old properties:
- Prime location in historic or central, already developed neighborhoods
- Immediate access to established infrastructure
- Vibrant neighborhoods with strong cultural heritage
- Heritage potential
Comparative Long-Term Profitability Analysis
- Potential Appreciation:
- The Indonesian market remains dynamic; new builds sometimes benefit from better appreciation if located in an emerging area.
- Old properties can increase more in value in a sought-after historic neighborhood.
- Rental Income:
- New homes often attract a demanding international clientele, allowing for premium seasonal rentals.
- Well-located old properties offer stability through regular local demand.
- Market Trends:
| Type | Estimated Appreciation (%/year) | Gross Yield (%) |
| New | +5% to +8% | Up to 10–12% |
| Old | Variable (+4% if renovated) | Between 7–10%, more stable |
Practical Examples / Case Studies
Example #1 — New Tourist Villa in Canggu:
An investor buys a modern villa (~€3,000/m²), benefits from a temporary exemption on certain local taxes, easily attracts an international clientele via Airbnb with a high occupancy rate (>80%) during peak season. Initial costs are controlled thanks to builder warranties.
Example #2 — Renovated Old House in Ubud’s Historic Center:
Initial purchase around ~€1,200/m² but immediate need to invest about ~€400/m² in renovations. However, the house benefits from the local charm sought by long-term expatriates; stable yield but moderate asset growth as the neighborhood is already mature.
Recommended Criteria for Choosing Between New and Old Real Estate
- Available budget
- Primary objective: quick resale vs. long-term rental
- Tolerance for renovation/repair risk
- Preference for recent technology vs. authenticity/heritage
- Land availability or local real estate scarcity
Key Takeaway:
If your priority is a secure investment without technical hassles or significant maintenance in the early years—and you are primarily targeting the tourist clientele—new real estate often emerges as the first choice. For those seeking an authentic property that immediately benefits from the existing urban fabric, even heritage, while being ready to invest in modernization/regular technical upkeep, old real estate remains relevant, especially in established city centers.
Good to know:
Investing in new real estate in Indonesia incurs significant costs, including construction fees, development costs, and specific taxes, but offers the advantage of modern technology, energy efficiency, and builder warranties. In contrast, old real estate, often located in mature areas with solid infrastructure and architectural heritage, may require costly renovations and carries high property taxes, but generally offers lower acquisition costs. Comparing the two reveals that long-term profitability depends on factors such as market trends, property appreciation, and potential rental income. For example, case studies in Java show that new investments often prove profitable over the long term, while purchases of old properties are recouped more quickly in stable markets like Bali. Investors should align their choice with their budget, investment goal—whether quick resale or stable rental—and personal preferences, while considering the specific regional dynamics.
The Advantages of New Real Estate in Indonesia
Financial Advantages and Tax Incentives
Purchasing new real estate in Indonesia, especially in Bali or the new capital Nusantara, comes with several significant tax and financial benefits:
- Tax Exemptions and Reductions:
- In Nusantara, investors benefit from total income tax exemptions for up to 25 years for investments made before 2035. Those made before 2045 can obtain up to 20 years of tax relief.
- Favorable Property Taxation:
- Reduced rate on rental income (10 to 20% depending on the legal structure used).
- Low property tax (approximately 0.5% of the declared property value).
- Possible Additional Deductions:
- Deduction of expenses such as maintenance or insurance from taxable income.
- Existence of double taxation treaties with several European countries.
| Type of Advantage | Description | Key Figures |
|---|---|---|
| Income Tax Exemption | Up to 25 years in Nusantara | Depends on investment date |
| Rental Tax Rate | Reduced taxation via local company | Approximately 10–20% |
| Property Tax | Calculated on declared value | ~0.5% |
Technological Aspect and Long-Term Savings
New constructions in Indonesia typically integrate modern technologies:
- Home automation systems (smart management of air conditioning/lights/security)
- Energy-efficient equipment: solar panels, enhanced insulation
- Increased use of sustainable materials
These innovations allow:
- A notable reduction in annual energy bills compared to older homes
- Increased property value in a context where demand for “green” buildings is rising
Safety and Compliance with Seismic Standards
Indonesian regulations require new constructions to strictly comply with the latest seismic standards—a crucial element in this country exposed to high seismic risk.
Key points:
- Reinforced structures adapted to major tremors
- Integrated automatic gas/electricity shut-off systems
In old properties:
- Buildings sometimes non-compliant or requiring costly upgrades to address seismic risk
Recent Examples Illustrating These Advantages
Non-exhaustive list:
- Nusantara New Capital (Borneo)
- Certified low-energy residential projects
- Smart grids, infrastructure fully powered by renewable energy
- Extremely attractive tax regime for early investors
- New Projects South Bali – Canggu/Uluwatu
- Recent villas equipped with solar/home automation
- Strict compliance with latest local seismic standards
| Criterion | New Real Estate | Old Real Estate |
|---|---|---|
| Energy Consumption | 200 kWh/m²/year | |
| Seismic Standard Compliance | Yes | Not systematic |
| Taxation | Specific relief / low rates |
By choosing a new property in Indonesia, it is therefore possible to maximize financial advantages while sustainably benefiting from modern technological comfort and optimal safety against natural hazards.
Key Takeaway: Choosing new builds guarantees major tax optimization, lasting modern comfort thanks to advanced technological integration, and superior safety due to strict compliance with the latest seismic standards.
Good to know:
In Indonesia, purchasing a new property offers several financial advantages, notably through tax incentives like tax reductions and subsidies granted by the government, making these acquisitions often more attractive than old ones. New constructions typically integrate modern amenities and energy-efficient technologies, allowing owners to achieve long-term savings. Furthermore, in terms of safety and compliance, these projects adhere to the latest seismic standards, crucial in a region prone to earthquakes. For example, recent projects like Meikarta and PIK 2 illustrate these trends, offering modern and secure homes. Statistically, energy costs can be reduced by 20 to 30% compared to older buildings, highlighting the economic advantage of new real estate.
Price Evaluation: New vs. Old Real Estate in Indonesia
Prices for new and old real estate in Indonesia vary greatly depending on the city, precise location, property type, and economic trends. Recent data shows significant gaps between Jakarta, Surabaya, and Bali.
| City/Areas | Average Price €/m² New | Average Price €/m² Old | Recent Trend |
| Jakarta | 1,800 – 2,400 | ~1,200 – 1,600 | +4 to +7%/year since end of pandemic |
| Surabaya | ~1,500 – 2,000 | ~900 – 1,400 | +3 to +6%/year |
| Bali (Seminyak) | 2,500 – 3,500 | ~2,000 | >+8%/year in sought-after areas |
| Bali (Canggu) | 1,800 – 2,500 | ~1,200–1,800 | Saturation, slowed increase |
| Bali (Uluwatu) | 1,500–2,000 | ~800–1,500 | Rapid increase in emerging areas |
Indicative data for standard apartments/villas; high-end or atypical properties may exceed these ranges.
Price Variations Over Recent Years
- In Jakarta and Surabaya, the post-pandemic economic recovery has reignited a moderate but continuous increase.
- In Bali, after strong growth linked to the return of international tourism from mid-2022 (+8 to +12% in some neighborhoods), the pace is slowing in saturated areas like Canggu while other sectors emerge with strong upside potential.
- The gap between new and old tends to widen in central or tourist areas where foreign demand is strong.
Factors Influencing Prices
List of main factors:
- Location: proximity to beach/tourism (e.g., Seminyak/Canggu) = significant premium per m²
- Modern Amenities: private pools, enhanced security, or home automation drive up the price of new builds
- Recent Economic Trends: tourism rebound in Bali; increased urbanization around Jakarta
- Legal Land Status: clear titles are more expensive than temporary usage rights
Local Consumer Preferences
Indonesian buyers often favor new real estate for:
- Ease of maintenance,
- Contemporary amenities,
- Superior rental yield for seasonal rentals,
- but remain attentive to the value-for-money ratio, which can make a renovated old property attractive if well-located.
Old real estate appeals mainly for its lower initial cost and traditional charm. However, it frequently requires significant work to meet the international standards sought by expatriate or tourist clientele. This duality explains why some markets (e.g., Ubud) see growing demand for high-end renovations.
Key Takeaway
The choice between new and old real estate largely depends on the buyer/investor profile:
- New = rapid appreciation & low management;
- Old = opportunities if purchased below market value then smart renovation;
- Rental yields are generally higher on well-located new products (>6–10%).
Good to know:
In Indonesia, the real estate market shows notable disparities between old and new. In Jakarta, prices per square meter for new properties generally start around 15 million IDR, while those for old properties range between 11 and 13 million IDR. Surabaya and Bali follow a similar trend, although Bali displays higher per-meter prices due to its tourist popularity. Over recent years, new properties have seen a more consistent appreciation of 3-5% per year, driven by modern developments and infrastructure improvements. Prime locations, such as city centers or proximity to economic hubs, are a key factor in price variations. Indonesians show a growing preference for new constructions due to modern infrastructure and reduced maintenance, influencing increased demand and thus a continuous price rise.
Builder Warranties in Indonesian Real Estate
In Indonesia, when purchasing a new property, builder warranties are significantly more limited than in Europe or France.
| Type of Warranty | Typical Duration | Nature of Covered Defects |
| Legal Builder Warranty | 3 months (legal) | Visible defects, apparent faults, defects affecting use |
| Possible Contractual Extension | Up to 1 year | Hidden or structural defects detected after delivery |
| Equipment Warranty | Rarely specific | Generally included in the overall warranty if offered |
| Supplementary Warranties | Per private contract | Sometimes extension to certain major damages (earthquakes, floods) |
Key Takeaway:
- The standard legal duration is very short: three months from the handover of keys.
- Some developers contractually offer an extension of up to one year to cover potential hidden defects or structural faults.
- There is no mandatory ten-year or two-year warranty in Indonesia as in France. Warranties covering equipment (plumbing, electricity, etc.) are not systematically provided and depend on the contract with the developer.
Warranties for Old Real Estate:
For an old property, no specific warranty is provided by law. The buyer therefore bears the risk of any potential faults or deterioration after purchase alone.
List of Legal Obligations Imposed on Builders:
- Minimum obligation for the builder to intervene for three months after delivery to correct any defect reported within this period.
- Any additional coverage depends entirely on the developer’s discretion and must be stipulated in the contract.
Influence on Purchase Decisions:
Buyers often favor new builds when the developer offers a contractual extension beyond the regulatory three months. However:
- Increased legal security if contractual extension
- Reduced coverage = increased risk for the buyer
- Home insurance recommended but not mandatory unless required by the bank
Caution: In the event of a major disaster (earthquake/flood), it is advisable to take out suitable home insurance as these risks are generally not covered by standard builder warranties.
The contrast with old real estate is stark: almost total absence of post-acquisition protection except for hidden defects proven in court. This reality prompts many buyers to carefully negotiate their contracts and sometimes favor a new home benefiting from at least some temporary additional warranties when making their final choice.
Good to know:
In Indonesia, purchasing a new property generally comes with significant builder warranties, such as a ten-year warranty covering structural defects, often lasting ten years, and a two-year warranty for equipment, like plumbing or electricity, lasting about two years. Unlike old properties, where these warranties may be lacking or even non-existent, these protections reassure buyers by mitigating the risk of costly defects. Builders are legally required to offer these warranties, thus reinforcing confidence in new properties. Certain regions may also offer specific warranties, such as coverage for damage related to extreme weather conditions. These warranties often make new real estate more attractive compared to old, thus influencing purchase decisions in favor of recent constructions, while providing assurances against long-term financial contingencies.
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Cyril Jarnias is an independent expert in international wealth management with over 20 years of experience. As an expatriate himself, he is dedicated to helping individuals and business leaders build, protect, and pass on their wealth with complete peace of mind.
On his website, cyriljarnias.com, he shares his expertise on international real estate, offshore company formation, and expatriation.
Thanks to his expertise, he offers sound advice to optimize his clients' wealth management. Cyril Jarnias is also recognized for his appearances in many prestigious media outlets such as BFM Business, les Français de l’étranger, Le Figaro, Les Echos, and Mieux vivre votre argent, where he shares his knowledge and know-how in wealth management.
