Buying Property In Indonesia
By : Alvin Alexander
Can foreigners buy property in Indonesia? Well, before I answer this question, I need to declare one thing : I’m not a lawyer and I don’t pretend to be one. I always advise everyone who asks anything regarding the property ownership in Indonesia to consult a professional lawyer or notary. What I can do is to give my opinions based on my knowledge and understanding, having been a professional real estate consultant for more than 10 years. I also keep as up to date as I can by keeping continuous discussions with those professionals that I see as being the most up to date in this field.
The ownership of property in Indonesia by foreigners, can be said, is a complex matter. The Indonesian Agrarian Law (Law no 5 of 1960) has established a range of land titles including the titles hierarchy that creates the basis of the legal principles of controlling property in Indonesia.
First in the rank is the Hak Milik (freehold) title. There is no circumstances in which foreigners can own property of Hak Milik title in Indonesia. This title is only available to Indonesian nationals.
Then we have a lower rank title called as Hak Guna Bangunan/HGB (right to build and use) title. The HGB title can be owned by Indonesian nationals and by registered Indonesian legal entity whether it is owned by Indonesian nationals or by foreigners. A foreigner itself, cannot own a property with HGB title.
After that we have the Hak Pakai (right of use) title. This title can be owned by either Indonesian nationals or foreigners, provided the foreigners meet some criteria as outlined in Minister of Land Regulation no 13 of 2016. I will explain about this later.
The lowest rank is Hak Sewa (leasehold) title. There is a misconception among many brokers in Jakarta that leasehold is the same as Hak Pakai. But no, it is different. In Hak Pakai (right of use) you will have a certificate under your name issued by our land governing body called as Badan Pertanahan Nasional(National Land Agency). In leasehold property you do not have a certificate. Leasehold is basically a lease agreement, drawn up and legalised by a notary, but is not registered with the National Land Agency.
Please keep in mind that Indonesia has strict laws that protect the rights of the lessee either they are Indonesian nationals of foreigners thus making a lease as a safe arrangement.
On one occasion, a personal assistant of a Sri Lankan billionaire called me to arrange a meeting regarding her boss intention to buy property in Indonesia. I asked her, “Does your boss have KITAS (temporary residency permit)?”
She said, “No.”
“Does he have Indonesian legal entity?“, I replied.
She replied, “No.”
“So what is your boss intention to buy property in Indonesia?“, I asked her.
“For his vacation home“, the assistant replied.
“Then under no circumstances can you control property here except the leasehold properties such as Kempinski Residence, Senayan City Residence or FX Residence“, I answered her.
“But I heard that now Indonesia is opened for foreign property ownership“, she asked.
“I must acknowledge that there are rumours of greater ease of foreign property ownership in Indonesia which have raised false expectations among aspiring foreign investors. But the latest regulations of our government regarding foreign property ownership in Indonesia is only an evolution of the previous regulations, not a revolution one. It merely clarifies the rules on foreign property ownership that were not clear enough in the previous regulations.
So there is no revolutionary change.
You should know that the most secure way of controlling property for the foreigner in Indonesia is by having a Hak Pakai (right of use) property. This is because your own name will be on the title issued by our National Land Agency. The Minister of Land regulation no 13 of 2016 states that the Hak Pakai title for a single residential property by a foreigner is now available for an initial duration of 30 years and can be extended for a further 20 years and then renewed for another 30 years. So the maximum is 80 years.
However in order to own a property with Hak Pakai title you must meet 2 criteria. First you must be legally reside here by having a temporary resident permit called as KITAS or KITAP. Second, in Special Capital Region of Jakarta, the minimum property price you can buy as a foreigner is Rp 5 billion.
So if you do not meet any requirements above, then either you buy a leasehold property or you set up an Indonesian legal entity called as a PMA company which later can be used to buy property with HGB(right of use and build) title.
The explanation above then put an end into our discussion