Frequently Asked Questions

 Energy costs (Fuel/electricity/water) are extremely low, as are the costs of domestic help. (i.e. maid/gardener/security/pool maintanance) 

There are three ways a foreigner can own property in Indonesia:

  • Assigning an indonesian nominee.
  • Founding a company.
  • Leasing property. 

 Ownership takes effect immediately on signing. A typical transaction can be completed as quickly as it takes for funds to be tranfered from buyer to seller. The Notaris can act as a neutral party by holding the ownership documents until the agreed sum has been transfered. 

 No. In the indonesian law, the Notaris (Registra of Property) acts as a neutral party on behalf of the buyer and seller. 

 Apart from the services provided by the Notaris (usually approx. between 1 and 3 percent of the price) there are government taxes to be payed.

This is usually 10 percent, split evenly between buyer and seller on the declared value of the property. 

For foreigners, there are basically three options to legally secure their property.

Leasehold Investment

Indonesian Nominee Power of Attorney Agreement

PMA Foreign Investment Company Structure

These three options are explained below in simple terms. Securing property in Indonesia can be a lengthy process which requires patience and diligence.

 

We recommend that you seek the best professional and legal advice to fully check all land titles, certificates of ownership and building permits, and that you have all transfer of lease or ownership documentation prepared by a reputable legal notary. We will be happy to recommend reputable lawyers.

Property and Land Rights of Indonesia are based on the Agrarian Law (1960).

Below are the various land categories and principles of ownership that are frequently used. Currently under this law, there are two categories of land:

 

  • Community Land - Tanah Adat

is land belonging to a certain registered community, wherein 2 individual rights and 6 community rights can be eventually converted to a certified title.

 

  • Certified Owned Land - Tanah Hak Milik

is land belonging to an individual, registered under a local land agency,

and legally documented through a Notary.

 

There are also 5 Principles of Ownership:

 

1. Right of Ownership (Hak Milik)

The right of ownership, which can be sold, transferred, bequeathed and mortgaged to another individual. This is often referred to as 'Freehold' land.

 

2. Right to Build (Hak Guna Bangunan - HGB)

The right to build on the property for up to 20-30 years with the option to extend. This right can be sold, transferred, bequeathed and mortgaged to another individual.

 

3. Right to Lease (Hak Sewa Bangunan)

The right to lease a property. This right is transacted between the lessee and the lessor, and can be properly officiated by a Legal Notary under local law. Lease periods vary, with up to 25 years being usual, with an Option to Extend often being successfully negotiated.

 

4. Right of Use (Hak Pakai)

The right to use land for a specified period of time, usually a maximum of 75 years. This right cannot be sold, transferred, bequeathed and mortgaged to another individual, unless a special grant has been approved. This right is applicable to Indonesians, foreigners permanently domiciled in Indonesia, or a foreign company with a representative office in Indonesia.

 

5. Right of Managing (Hak Guna Usaha - HGU)

 The right to manage state-owned property for agriculture or husbandry for up to 35 years with the option of a 25 year extension. This certificate can be mortgaged.

1. Leasehold Investment

       Until recently, this was the only means for a Foreign Investor to secure land in Indonesia. A Leasehold Investment offers complete protection to the foreigner during the term of the Lease Agreement.

A Lease Agreement is prepared, specifying the period of time, usually in terms of up to 25 years, and often with an option to extend. Any options that the Foreign Investor would like to include, such as the right to demolish, the right to extend, the right to build and the like are discussed, agreement is reached with the owner and clearly stipulated in tight legal documentation prepared by a public notary and lawyer. At the expiry of the lease period, the Agreement can be extended or the property allowed to revert to the Owner. An application to extend the Lease Agreement period should be submitted no later than a year before expiry. The Foreign Investor can negotiate directly with the landowner at the time of renegotiation in order to agree to a property lease rate for the extended lease period.

 

2. Indonesian Nominee Power of Attorney Agreement

      Currently, Foreign Investors are not entitled to own 'freehold' property known in Indonesia as the Right of Ownership (Hak Milik).

However, it is possible to enter into a legal agreement with an Indonesian Nominee, who secures the title to the property on behalf of the foreigner. While the Indonesian Nominee is the registered owner, the Foreign Investor holds the land certificates as security. In Indonesia land cannot be sold without an authentication procedure which includes sighting of the original land certificates.

At the time of property purchase, the Indonesian Nominee and the Foreign Investor simultaneously sign a legal Power of Attorney. The Power of Attorney waives all rights of the Indonesian Nominee and gives full beneficial rights of the property to the Foreign Investor. The Foreign Investor is then able to build on the property, onward sell or lease the property and transfer the property to their next of kin. Additionally it is possible to specify that if the laws in Indonesia change allowing Foreigners to own land, that the titles will automatically be transferred into the Foreign Investor's name.

The Indonesian Nominee may receive a pre-agreed fee for their responsibilities as the titleholder. The amount largely depends on the relationship the Foreign Investor has with the individual Nominee.

 

3. PMA Foreign Investment Company Structure

       Property acquisition through a PMA (Penanaman Modal Asing) Foreign Investment Company structure enables Foreign Corporations to own land in Indonesia, without having to have Indonesian partners. The PMA can be 100% owned by the Foreign Investor. This was originally established for large Multinational Corporations but has been extended to land holdings by smaller off-shore companies.

Ownership is limited to 30 years, after which it is reviewed by the Government. It is generally renewable at a nominal cost. It seems very doubtful that the government will change the PMA structure. Positive changes have been occurring in the past few years for foreign investment and policy direction seems to be increasingly more favourable for foreigners.

Audited accounts must be regularly furnished to the Government showing the PMA trading position, and operating taxes must be paid. The cost of setting up a PMA structure is between 30 to 40 million Indonesian Rupiah and can take 4 months or more to set up. Once completed the company can apply for work permits for foreign directors, with a total of 3 work permits in the first year of operation.

The disadvantage of a PMA Company property acquisition is that the property should be used for company projects only, and that a PMA Company, like any other corporate entity (Indonesian or Foreign), is not eligible for 'Freehold' (Hak Milik) Title. Whenever freehold land is transferred to a corporate entity, the property title is changed to Right to Build (Hak Guna Bangunan - HGB), which then has to be renewed after 20 or 30 years.

 

 

LAND CATEGORIES AND PRINCIPLES OF OWNERSHIP

Property and Land Rights of Indonesia are based on the Agrarian Law (1960). Below are the various land categories and principles of ownership that are frequently used.

Currently under this law, there are two categories of land:

 

Community Land - Tanah Adat

- is land belonging to a certain registered community, wherein 2 individual rights and 6 community rights can be eventually converted to a certified title.

 

Certified Owned Land - Tanah Hak Milik

- is land belonging to an individual, registered under a local land agency, and legally documented through a Notary.

There are also 5 Principles of Ownership:

 

1. Right of Ownership (Hak Milik)

The right of ownership, which can be sold, transferred, bequeathed and mortgaged to another individual. This is often referred to as 'Freehold' land.

 

2. Right to Build (Hak Guna Bangunan – HGB)

The right to build on the property for up to 20-30 years with the option to extend. This right can be sold, transferred, bequeathed and mortgaged to another individual.

 

3. Right to Lease (Hak Sewa Bangunan)

The right to lease a property. This right is transacted between the lessee and the lessor, and can be properly officiated by a Legal Notary under local law. Lease periods vary, with up to 25 years being usual, with an Option to Extend often being successfully negotiated.

 

4. Right of Use (Hak Pakai)

The right to use land for a specified period of time, usually a maximum of 75 years. This right cannot be sold, transferred, bequeathed and mortgaged to another individual, unless a special grant has been approved. This right is applicable to Indonesians, foreigners permanently domiciled in Indonesia, or a foreign company with a representative office in Indonesia.

 

5. Right of Managing (Hak Guna Usaha - HGU)

The right to manage state-owned property for agriculture or husbandry for up to 35 years with the option of a 25 year extension. This certificate can be mortgaged. 

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