How to Buy Property in Indonesia
Even if Indonesia is starting to open up to foreign investment, you’re still not capable of buying and owning freehold property as a foreigner.
Instead, you can acquire different titles that allow you to lease, use or build physical structures on that property (land). I will explain more about the different titles later in this article.
Still, it’s not uncommon that foreigners, in places like Bali for example, let Indonesian nominees hold the freehold title for them, although this is risky as you’re not protected under Indonesian laws.
What property can you acquire?
For the time being, you can get a right-to-use, right-to-build or a right-to-lease title for the following property:
- Houses that aren’t subsidized by the government
- Apartments with strata titles
- Vacant land (you can also build a house on the land, if you get the right agreements in place, with the title owner)
Foreign ownership regulations in Indonesia
Indonesia has four common property titles that are covered in the Basic Agrarian Law from 1960.
Let’s have look at each one of them.
Hak Milik (HM): Freehold title
Only available to Indonesian citizens. Hak Milik reserves you the right to use land in any way, but you can’t use or capitalize on the natural resources built under the land.
An owner of a Hak Milik title can sell the title, exchange it or use it as a mortgage.
Hak Pakai (HP): Right-to-use title
Hak Pakai is a Right-to-use title and can be obtained from a person who owns the Hak Milik. This gives you the right to construct residential property on the land.
The lease term is set for 25 years and can be renewed for a maximum period of 80 years.
In order to obtain a Hak Pakai title as an individual, you need to reside in or have Indonesia as your domicile, this brings a requirement to apply for a KITAP (permanent stay permit) or a KITAS (temporary/limited stay permit).
Hak Pakai is one of the strongest titles and you’re allowed to sell and transfer the title to another person, who’s eligible to own the title in Indonesia.
What happens if I decide to leave Indonesia?
If you decide to leave Indonesia, you need to give up your right-to-use title or transfer it to another person, which is eligible to get the ownership.
The time period to manage this is set to 1 year, before you leave the country.
Hak Guna Bangunan (HGB): Right-to-build title
Only available to Indonesian citizens, or companies who are incorporated under Indonesian laws.
This includes so called PMA companies, falling under the category foreign direct investment.
HGB’s are valid for a period of 30 years, but can be extended with an additional 20 years.
What are the main difference between Hak Pakai and Hak Guna Bangunan?
- You can get a Hak Pakai title as an individual, but Hak Guna Bangunan requires that you open a PMA company
- You can’t use the Hakai Pakai title as a mortgage, which is possible with a Hak Guna Bangunan title
Hak Sewa (HS): Right-to-lease title
If you manage to get a Hak Sewa title, you’re allowed to lease the buildings or land that’s owned by a person who holds any of the above mentioned titles.
You can’t register a Hak Sewa title at the land registry; hence it doesn’t bring any certificate. The leasehold period is set to 25 years with a possibility for extension.
Can foreigners buy land in Indonesia?
Foreigners are not allowed to own land in their own names.
The same as it goes in most other Southeast Asian countries (except for Malaysia, and perhaps Singapore), you can’t own land as a foreigner.
Still, some foreigners buy land in Indonesia through contractual setups, by letting an Indonesian citizen use his or her name for the freehold title (Hak Milik).
From a legal viewpoint, you can buy property with different titles (explained above) that allows you to use (build a house) or lease the land.
Below we’ve listed some different options you have to acquire and control land.
1. Acquiring property with a freehold title (Hak Milik) through an Indonesian nominee
The first option you have is to buy land with the help of a local nominee, for example a spouse or another person you trust.
It’s common that foreigners who have an Indonesian spouse use that person as the nominee. Keep in mind though that you’re not protected if you go for this option.
Firstly, the plot of land will be transferred from the seller to the Indonesian nominee. The following agreements should be made with your local nominee:
· Loan agreement
· Saying that you lent the money to the Indonesian nominee that buys the property.
· Power of attorney
· Giving you the rights to mortgage, sell or lease the property.
· Permanent right of use agreement
· Gives you the rights to use and occupy the land.
2. Acquiring property with a right-to-use title (Hak Pakai) through a PMA company
As stated above, you can get a right-to-use title by opening a so called PMA company (Penanaman Model Asing Company), used for foreign direct investment.
This is more complex though, and you can’t simply open a company to use as a gateway to the Indonesian property market.
To open a PMA, you need to provide a business plan, work operatively in Indonesia and deposit money into a local Indonesian bank account.
Keep in mind that you can get a Hak Pakai title (right-to-use) without the necessity of open a PMA company whatsoever, but this requires that you have Indonesia as your domicile.
3. Lease land
As explained above, you can lease property by acquiring a property with a Hak Sewa title. Villas, condos and apartments can all be leased with if you manage to get a Hak Sewa.