As of late 2015, expats who reside legally in Indonesia are permitted to own landed houses for a period of up to eighty years. Whereas in the past it was incredibly difficult to buy property as a foreigner in Indonesia, a process that used to demand the involvement of Indonesian representative or a validated business plan, foreigners can now own property under the ‘right-of-use’ agreement.
Under the new legislation of House Ownership of Foreigners Residing in Indonesia, the ‘right of use’ agreement, or hak pakai, allows expats to purchase housing under the following conditions:
- The landed house can be bought for an initial period of 30 years, which can be extended twice; once by another 30 years and then by another 20, amounting to a limit of a possible 80 years ownership.
- The property in question must be purchased directly from the developer
- The property must be bought at a fixed minimum price which is determined by the region
- It is not permitted that the property be sublet to a third-party under any circumstances
- If the expat leaves the country to reside elsewhere, they must relinquish the right-of-use or transfer it to someone else who meets the requirements of property ownership. This must all take place within one year of the expat’s departure from Indonesia.
However, to purchase under the ‘right-of-use’ category is still weaker than to do so under the ‘right-of-ownership’ category which is available to Indonesian citizens. This can make it difficult for non-citizens to get a mortgage from a state financial institution. Although there is no law which permits the purchase of credit from Indonesian banks for these purposes, the purchase of land for expats still remains a sensitive topic for many locals and is reflected in the practice of their businesses.
The minimum price for a property is also fixed at an incredibly high rate, even by Western standards. For a house in Jakarta, you are looking at having to pay a minimum of 10 billion IDR, which roughly works out at around $750,000 USD.
If purchasing a house under the ‘right-of-use’ category is not a viable option for you, there are three other possible means of buying a property, which are as follows:
Through a ‘Penanaman Model Asing’ (PMA) Company - PMA is a status of doing business in Indonesia. A PMA company has 30 years to operate after formation and it can be extended by a further 30 years; then a further 30 additional years if it expands its company enough to require additional financial investment. This company can be owned fully by a foreigner.
The Right to Build (Hak Guna Bangunan – HGB) is available to PMA companies. The right to build or construct on land is valid for 30 years, which can be extended for an additional 20 years, and then for a further 30 years thereafter.
You will have to do the following to found a PMA company:
- Submit a detailed business plan.
- Operate in a business environment that adds value to Indonesia, specifically in terms of foreign skills, employment and environmental benefit.
- Make an appropriate cash deposit in an Indonesian based bank. (The amount varies and is calculated from the capital employed in the business).
- Show the property investment as an asset of the company.
The whole application process takes roughly 3 - 4 months and once completed the company can begin to apply for work permits for foreign directors. In the first year the company can apply for three permits. The cost of setting up a PMA company is roughly US $3,000.
Through a Leasehold Title - This can be granted to any long term staying foreigner that has a working or residency visa. The lease runs for 25 years and can then be renewed for a further 25 years on expiry. It is important to hire the help of a lawyer for the transaction and monetary exchange, and transactions must take place at the Indonesian Notary’s local office, Pejabat Pembuat Akta Tanah (PPAT), where the land is located.
Western buyers may be used to giving a deposit but it is not advisable as there is no code of conduct for estate agent companies in Indonesia and they have no legal reason to protect the best interests of the buyer. Stamp Duty of IDR 6,000 (US$0.45) is needed for each document copy of the Land Deed and two copies are needed.
There are both registered and unregistered land options for purchase, registered being certified land that registered at the local land office. Unregistered land (Adat land) is community owned, therefore any land purchase must be investigated to determine whether it is government or community registered land.
The complete application process of registering a property involves six procedures and takes roughly twenty-two days.
Through an Indonesian representative - It is common for an Indonesian representative to serve as an intermediary and acquire land for the purchaser. Ownership of the land therefore passes from the previous owner to your representative. For the buyer’s safety, three agreements must be met with the Indonesian representative. They are as follows:
- Loan Agreement – this states that the foreign buyer lent the purchase price to the Indonesian representative.
- Irrevocable Power of Attorney – this gives the foreign buyer full authority to sell, lease, mortgage, etc. the land.
- Permanent Right of Use Agreement – this gives the foreign buyer full rights to the use and occupancy of the land.