7 Points That You Can Find Out Before You Set The Price for Renting Land in Indonesia

 

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By:

Team of Hukumindo

Previously, the www.hukumindo.com platform has talk about "Police Killed, Shot by Police, in Bogor Region", "How To Buy Land In Indonesia?", you may read also "Principles of Buying Land in Indonesia" and on this occasion we will discuss about '7 Points That You Can Find Out Before You Set The Price for Renting Land in Indonesia'.

Land is an investment advantage with a selling price that always goes up every year. Apart from being sold, land assets can also be leased with an agreement system between the two parties concerned, namely the tenant and the owner within a certain period of time. If you plan to invest in land by renting it out, you need to pay attention to several ways that need to be understood in determining the right price.[1]

The rental price cannot be decided by the wishes of the owner at random. There are several aspects that need to be looked at, such as location, land area, market, needs and others to assess the quality of the specifications of the land you have. In addition, determining the rental price cannot be too expensive or cheap. Determining the rental price can be seen from 7 points that you can find out before you set the price for renting land as follows:[2]

1. Regional Research, region is one of the aspects that influence rental price decisions because each region has different potential. Land rental prices will be expensive when the rental area is close to urban areas or roadsides. Unlike in rural areas, rental prices tend to be lower.
2. Demand Research, the demand referred to here are personal for those of you who want to passively generate additional income. Therefore, it is not wrong to determine the price of land based on your needs such as daily needs, saving, investing, and so on. Provided the rental price is reasonable for potential tenants.
3. Location Value Research, the location of the land is also a point of consideration for the rental price in terms of its environmental value. For example, land located in industrial areas, offices, or in crowded areas is a factor in land prices that have the potential to be higher because this is a plus point for tenants.
4. Market Price Research, the latest market price research so you can determine prices by discussing with real estate agents who are located close to the land area. Real estate agents usually understand property values ​​as your consideration in determining the level of your land rental price.
5. 'Cap Rate', this method of determining the price of land by taking into account the cap rate of the level of property capitalization. Apartments have a capitalization rate of 7-12%, while houses are around 3-5%. In addition, the vacant land capitalization rate is below the value of the house. Here is a formula that you can use to determine the price of land seen from the cap rate as follows. Property Price x Cap Rate (%) = Rent Price (Rp)/Year.
6. Selling Value of Tax Objects (NJOP), the method for determining the price of land is based on the NJOP, namely the estimated price of the house is based on the condition and size of the property owned. Pricing is determined by multiplying the NJOP by the percentage of the capitalization rate. NJOP is very useful for determining a fair price to sell or rent, so if you offer a rental price that exceeds the NJOP, then the benchmark price is considered too high. However, because the property being rented out is vacant land, there is nothing wrong if you rent it out at a price below the NJOP as well.
7. Calculation of Yield, calculation of yield is a calculation in a year on the profit from leasing property with the following formula. Profit for a year's rent: property rental price: property price x 100. For example, suppose you have a property price of IDR 500 million and in a year you want to make a profit of 4%. So the rental price that you can offer is IDR 20 million per year.

And if you have any legal issue in Indonesia territory, contact us then, feel free in 24 hour, we will be glad to assist you. 

*) For further information please contact:

Mahmud Kusuma Advocate

Law Office

Jakarta - Indonesia.

E-mail: mahmudkusuma22@gmail.com

________________

References:

1. "7 Cara Tentukan Harga Sewa Tanah Kalau Kamu Kebingungan", www.detik.com., Cri Tanjoeng, Diakses pada tanggal 3 Agustus 2023, Link: https://www.detik.com/properti/tips-dan-panduan/d-6852892/7-cara-tentukan-harga-sewa-tanah-kalau-kamu-kebingungan

2. Ibid.