As in other countries, there are quite a few pitfalls when buying land or starting an own company. Over the last few years, we received a lot of requests for help of clients and companies when facing a problem. These are the questions that are most frequently asked. Is your question not in this FAQ? Don’t hesitate to contact us.
The Minister of Land and Spatial Planning/Chairperson of the National Land Affairs Agency (BPN) has issued Regulation No. 13 of 2016 regarding the transfer of ownership of homes for foreign residents in Indonesia.
The new regulation permits foreign residents of Indonesia to directly purchase homes in Indonesia providing the subject homes meet the following minimum price levels:
- DKI Jakarta Rp. 10 billion
- Banten Rp. 5 billion
- West Java Rp. 3 billion
- Yogyakarta Rp. 3 billion
- East Java Rp. Rp. 5 billion
- Bali Rp. 3 billion
- West Nusa Tenggara Rp. 2 billion
- North Sumatra Rp. 2 billion
- East Kalimantan RP. 2 billion
- South Sulawesi Rp. 2 billion
- All other regions Rp. 1 billion
The new regulation also stipulate:
- Foreigners purchasing an apartment or a single-family residence must hold residency status.
- The apartment or single-family residence that can be held by a foreigner with “Hak Pakai” (Right of Use) or “Hak Pengelolaan” (Right of Management) status must, at least initially, be purchased from the Government or from a developer.
- Hak Pakai title is valid for a maximum period of 80 years.
- If the foreigner dies or is no longer an Indonesian resident, the land must be sold to a “qualified buyer” within one-year.
- A property can be inherited by a family member who is a foreigner if that person holds residency in Indonesia.
- The much-coveted “freehold” (Hak Milik) remains closed to foreigners in Indonesia.
Luxury Taxes may apply on the transaction in which a foreign resident acquires an apartment or single-family residence.
Land title(ownership) rules in Indonesia are stipulated in Law No. 5 of 1960 regarding Basic Principles of Agrarian Law (the “Agrarian Law”). Set out below is a summary of each type of land title available.
- Hak Milik (Right of Ownership)
Hak Milik is the most complete land title available under Indonesian law. Hak Milik is transferable and may be encumbered. Hak Milik is equivalent to freehold land or fee simple absolute under the common law system. Unfortunately, except for certain legal entities (not including PMA companies) designated by the Indonesian government, only Indonesian citizens are allowed to hold Hak Milik. This is not relevant for foreign individuals owning residential property in Indonesia.
- Hak Guna Usaha (Right of Cultivation)
Hak Guna Usaha gives the owner the right to exploit land for a certain period for the purposes of agriculture, fisheries or cattle breeding. Hak Guna Usaha is transferable and may be encumbered. Land with Hak Guna Usaha title may be owned by (i) Indonesian citizens and (ii) legal entities established under Indonesian law and domiciled in Indonesia, including PMA companies. Hak Guna Usaha is granted for a maximum period of 35 years and extendable for further 25-year period. Upon the expiration of such extension, the Hak Guna Usaha may be renewed. This is not relevant for foreign individuals owning residential property in Indonesia,
- Hak Guna Bangunan (Right to Use Building)
Hak Guna Bangunan is right to construct and own buildings on land. Hak Guna Bangunan is transferable and may be encumbered. Land with Hak Guna Bangunan title may be owned by (i) Indonesian citizens and(ii) legal entities established under the Indonesian law and domiciled in Indonesia, including PMA companies,
Hak Guna Bangunan is granted for a period of up to 30 years and extendable for a farther 20year period. Upon the expiration of such extension, new Hak Guna Bangunan title may be granted on the same land. This is the title most PMA companies use to hold real estate.
- Hak Pakai (Right to Use)
Hak Pakai is the right to use and/or to harvest from land, which is directly controlled by the State, or land of other persons. Hak Pakai may be encumbered. Hak Pakai may be owned by:
(i) Indonesian citizens;
(ii) Legal entities established under the laws of Indonesia and domiciled in Indonesia, including PMA companies;
(iii) Departments, Non-Departmental State Agencies, and Regional Governments;
(iv) Religious and social organizations-,
(v) foreigners residing in Indonesia;
(vi) Foreign legal entities which have representatives in Indonesia;
(vii) Representatives of foreign countries and international organizations.
Ordinarily, Hak Pakai is granted for a period of up to 20 years and can be extended for 20 years. Upon expiration of the extension period, Hak Pakai may be renewed. This is the title used, in recent years, to “sell” condominium units (both commercial and residential property) to foreign individuals,
- Hak Sewa (Right to Lease):
An owner of Hak Sewa is entitled to use property of others, with the owner of Hak Sewa obligated to make rental payments to the owner of such property. There is no fixed term for Hak Sewa. The following persons are eligible to hold Hak Sewa:
(i) Indonesian citizens;
(ii) foreigners residing in Indonesia;
(iii) legal entities established under the Jaws of Indonesia and domiciled in Indonesia, including PMA companies;
(iv) foreign legal entities which have representatives in Indonesia.
This is the title held by foreign individual and company renters of houses in Indonesia.
- Hak Membuka Tanah dan Memungut Hasil Hutan (Right to Clear Land and Collect the Forest Products):
Indonesian citizens may only hold this right.
Many foreign individuals in Jakarta, Bali and elsewhere also hold residential property indirectly through arrangements (often called nominee or trustee arrangements) where Indonesian individuals or companies are legal titleholder on behalf of foreigners. Under such arrangements, the foreigner generally funds the Indonesian purchasing the property and then takes a formal or informal security interest in the land purchased. These relationships are largely built on trust between the foreigner and the Indonesian and any contractual legal rights the foreigner has may be difficult to enforce. Nevertheless such arrangements are pretty common and many long-lived and appear to satisfy both parties.
In Indonesia you can buy building plots for beneficial prices. Same as in other countries, there is a risk when buying these buying plots. We want to prevent you from buying a building plot without taking every consideration into account Always make sure you hire a trustworthy real estate agent or ask us for advice. It is important to check if the selling party is actually the owner of the building plot, and if there are no legal obstacles for building there. When everything is juridical correct, you have to make a down payment by an acknowledged notary. The selling party has to provide the notary with the papers of ownership. After the land registry and the transfer of property has taken place, the remaining amount of money has to be paid. Beware of the fact that in Indonesia everyone can call themselves a real estate agent. Let us advise you.SOURCE: https://aiccusa.org/doing-business/land-ownership#foreign