Buying Property in Indonesia
This page is generously sponsored by Villas of Bali.
For many years Indonesia has decreed that land in Indonesia can only be owned by Indonesian citizens. Thus, if you want to buy a house (as a foreigner), this would have been legally impossible.
In the late 90s, new laws were enacted so that foreigners are permitted to purchase apartments and office space in Indonesia, IF the building has a strata title status. This enables the foreigner to own the apartment or office space but not the land on which it stands.
Further laws were passed in 2010 & 2015 which may make it easier for expats to hold 70-year leases on land, but the particulars/interpretation/implementation of the law aren't always clear.
In 2020, foreigners can own apartments through 30-year lease agreements with 20 year extensions; they can obtain, but not own, landed houses through leases. The long term leases held by foreigners do not come with the same guarantees/protections as Indonesian citizens, making them harder to finance through bank mortgages.
Indonesian Agrarian Law, Law No. 5 of 1960, governs the ownership of land in Indonesia. In it is a category of land ownership called "Hak Pakai" which mean the right to build on/use the land. As stated in this law, foreigners are only permitted to purchase land or homes under the “Right to Use” (Hak Pakai) title.
Paperwork for Real Estate Transactions in Indonesia
Real estate transactions in Indonesia are pretty straightforward, but yet tricky, as well as interesting business practices with several aspects blended in one single deal. Real estate transactions involve various legal fields such as property law, taxation law, inheritance law, as well as family law in general. In real estate transactions, the most well-known paperwork is the sale and purchase transaction. These are all very common legal transactions.
The Basic Agrarian Law in Indonesia stipulates that a sales and purchase transaction is the evidence that proves the transfer of title from the seller to the buyer. The law imposed that real estate transactions must be carried out and meet two criteria, i.e., transparent and paid in full. The legal transaction must be carried out in front of and under the supervision of an authorized officer. The law also imposed that it must be paid in full. In other words, the transaction cannot be executed, if you have any shortfall in the payment.
These are the things that you need to do before you proceed with the sale and purchase of property in real estate transactions in Indonesia:
Property Title Background Check
This is a must. No transaction can be carried-out without any formal background check of the legality of the previous title/ownership documents. In order to do this, you need to supply us with the original certificate of ownership. The legal status of the property will not be verifiable without the original document.
It is very important to conduct a background check before you make any further transaction with the seller of the real estate property. This will give you sufficient information about the current status of the property, as well as its title. Based on this information you can decide whether or not you want to proceed with the sale and purchase transaction.
The background check will show you if there’s any outstanding mortgage on the property. If yes, you need to make sure the owner removes the mortgage from the title first, before starting any further transaction with you as the buyer. You will also find out if the property is under any potential dispute or not. The background check is extremely important and I would not suggest proceeding with the transaction before the background check has been finalized.
You need to obtain information from the seller with copies of the following documents:
- Copy of Kartu Tanda Penduduk (So called "KTP"). If the property owner is married, you need to obtain a copy of the spouse's KTP too. Chances are, the spouse will also be required to sign the sale and purchase agreement with you. If they have no prenuptial agreement, it means the property you are buying is their marital asset, and therefore spousal consent is statutorily required. Otherwise, the transaction you're attempting is potentially illegal;
- Family card (so called Kartu Keluarga/KK). This document shows family members of the seller;
- Marriage certificate, if applicable. In the event, the spouse passed-away, you need to obtain his/her death certificate. In the event the seller is divorced, you need to obtain his/her divorce verdict with the division of property - certifying the property being sold is hers or his;
- Original of certificate of land ownership;
- PBB tax payment, called SPPT PBB. This represents payment of the current of building and land tax. This document is important in order to identify the tax applicable for the transaction. You will find out how much the seller should pay, and how much tax you should pay as the buyer.
- Seller’s taxpayer number, so called "NPWP."
If you're buying the property, you need to make sure you have the following documents available for the transaction:
- Copy of KTP. If you're married, you need to supply your spouse's KTP too. Unless, you signed a marital agreement, like a valid prenuptial or postnuptial agreement. Please contact Asep Wijaya for more details about these documents. If you're a mixed-married international couple, most likely you can't execute any transaction without this agreement;
- Family card. This would also be required in order to identify your legal next of kin. This document has the information on your Nomor Induk Kependudukan/NIK (Residency Registration Number) that will refer to your tax information. This is very important when we validate tax applicable to this transaction;
- Marriage certificate. We need to know your status, and how the state will treat the property under the current status, i.e., separate property or joint property. This certificate will have to come with the marital agreement, if applicable;
- NPWP. They need a copy of your taxpayer number in order to validate the tax applicable to this transaction.
Sale and Purchase Agreement
Your intention to conduct a sale and purchase transaction must be written in the form of an agreement. It’s called a Sales and Purchase Agreement (SPA). Both the seller and the buyer must be present to sign the SPA. You must come with your spouse if you're married.
A valid document like a marital agreement must be presented as well in the event you have a separation of property in your marriage. A prenup or postnuptial can serve as the document that you require with no assistance from your spouse. With this document, your spouse doesn't have to come with you to sign the SPA.
A valid SPA must be lodged at the land registry office in order to transfer the title from the seller to the buyer. One thing you need to be aware of is payment of the current year’s taxation must be settled before the title is being transferred. A tax validation will be carried out before the title transfer is conducted.
Ownership of the Property
When you're purchasing land and/or a house in Indonesia, you're dealing with a seller or the representative of the seller. You must deal with the owner of the property in order to protect your future investment. The owner must have legal rights to own the property that you are interested in buying. If he has the legal rights in the property, he must have the title of ownership that can be transferrable to you as the buyer.
He must be able to present his certificate of title to prove his ownership. The certificate is issued by the government of the Republic of Indonesia. The authorized government agency that is responsible for issuing a certificate of title is the Badan Pertanahan Nasional (National Land Registry), also referred to as the BPN. They have offices in every major city in Indonesia.
The certificate of the title if the house you are going to buy is issued by the land registry office where the property located. Property such as land, houses, and apartments are classified under the category of Immovable Property. The legal owner of the immovable property is the person whose name is printed on the title certificate.
The ownership of immovable property is different from the ownership of movable property, such as cars, etc. The legal owner of this type of property is the one whose name(s) is printed on the certificate of title. If the owner has passed away, his next of kin is the property’s legal owner. This usually consists of the surviving spouse, and his/her children. So, if the owner of the property is deceased, make sure you’re dealing with the right person.
As for movable assets such as cars, the person that controls the property can be considered the owner, although you might want to check the ownership of the certificate as well. Please contact me should you wish to discuss this.
The certificate of title in real estate property is strong evidence that serves as proof of ownership, as well as proof of registration from the local land registry. Article 19 of Basic Agrarian Law certifies that the government of Indonesia is conducting land registration in order to provide legal privilege to the owner whose name is printed on the certificate of title. The owner will automatically be included within the land registry database and therefore are subject to the prevailing laws and regulations in Indonesia.
Purchase of Property by an Expat/Indonesian Couple
The crucial preparation for purchasing property is whether or not the Indonesian spouse and the expat spouse have a prenuptial agreement for separation of property. If you do have this agreement, it would mean that the couple could legally purchase the property. This agreement must be signed BEFORE you are married.
Under Indonesian law property is jointly owned after marriage, unless there is a prenuptial agreement, and this means that property owned by the Indonesian spouse also becomes the property of the foreign spouse, which is illegal according to the Agrarian Law. Therefore the property must be sold within one year of marriage to a foreigner or converted from "hak milik" (right of ownership) to "hak pakai" (right of use) which decreases the value of the property. (Pasal 26 ayat 2)
Transfer of Title
You need to perform a title transfer when you purchase real estate. Your name must be registered as the latest owner of the property after you execute the sale and purchase agreement, and remit the payment to the seller. They will include the details of the agreement you executed with the seller of the property, as well as the date when you entered into the agreement.
Your name will be noted as the current owner of the property on the certificate of title. This proceeding involves the local land registry where the real estate property is located. You will be recognized as the legal owner after the proceeding completed. Please contact me should you wish to discuss any further about this.
When you fund the purchase of the property one hundred percent, and you want to include your Indonesian spouse as the property holder, you potentially need mortgage protection. Legally, the owner of the asset is the one whose name is printed on the property certificate. If you don’t see your name on the certificate, and you did sign a prenuptial agreement, then the property belongs to the spouse. This is free from claim by any party, especially you. This is normal when the couple is of different nationalities.
If you think you need to protect your original investment, then the mortgagor protection is for you. The holder of the title will not be able to sell the property without first reimbursing you for your full contribution, then the capital gain is divided evenly. Your name as the Mortgagor will be printed on the title certificate together with the Indonesian spouse’s name as the property holder. This is strong enough to give you protection of your financial interest in the assets, and to avoid you having to walk away from the marriage with nothing in hand.
Purchasing an Apartment or Office under Strata Title
Ownership of offices and apartments is possible through strata title deeds, but you need to be very cautious when dealing with the laws and regulations to ensure that your ownership of an apartment in a high rise building is secure.
The 1996 regulation (No. 41/1996) states that foreigners who reside in Indonesia, or visit the country regularly for business purposes, can purchase a home, apartment or condominium as long as it isn't a part of a government-subsidized housing development. However, foreigners can only hold land-use (hak pakai) deeds, and the development holds the "Hak Pakai" (right-to-build) deed. It's not possible for someone to have a land-use deed for a sub-unit of a right-to-build deed. The length of these titles varies as well. Therein lies some of the difficulties and unclear ownership issues.
This means that foreigners can effectively lease (not truly own) an apartment for up to 70 years, but not a free standing house. Within this 70-year period, foreigners must also periodically renew their right to use. The initial Hak Pakai period is for 25 years, then is renewed for an additional 25 years and finally a 20 year period.
Convertible Lease Agreement
One way for foreigners to go ahead an purchase property despite these legal ambiguities is to sign a Convertible Lease Agreement with the apartment property management office to purchase an apartment. Basically what this agreement entails is that the foreigner may purchase the apartment, but the title is still held in the name of the developer or property management firm, or an Indonesian nominee. This lease agreement is for a definite period.
The Convertible Lease Agreement states that if and when the prevailing laws and regulations permit the Lessee to become legal owner of the apartment/strata title unit, both the Lessor and the Lessee shall be obligated to sign a Deed of Sale and Purchase and the title shall be transferred to the foreign owner.
If you are interested in purchasing a condominium through this type of agreement, investigate the property management company thoroughly. Many property developers have undergone serious economic pressures and construction on many properties has been postponed or canceled. Show your contracts to a bona fide lawyer to ensure that all legal implications are covered thoroughly.
Further Note: When asked about the legality of Convertible Lease Agreements, lawyers we consulted stated very clearly that this is a VERY BAD idea and that lawyer should never advise that you to sign a Convertible Lease Agreement. As a foreigner you are entitled to Hak Pakai and you should insist that legal property status from the apartment building or developer so that the title is in your name. With a convertible lease agreement…you are totally at the mercy of the “appointed party” and that if they decide to change their minds you do not have much of a legal case against them as the agreement that the expat has between themselves and the Indonesian "appointed party" is not really a legal document.
It is best to just insist that the Hak Pakai is in your name. If the developer cannot provide a Hak Pakai document in your name, it may be because they do not have Hak Bangunan title. If this is the case, DO NOT BUY IT.
Using an Indonesian Nominee/Friend to hold your Title
Another way that you can purchase a condo is by paying for the property but putting the title in the name of an Indonesian citizen. Needless to say, this must be someone you trust implicitly since, according to the law, this person would be the legal owner, no matter what verbal or written agreement that you may have between the two of you.
Most lawyers will advise that you should NOT do this as again you do not have any “legal” document that says the property is yours. You are REALLY putting yourself in a vulnerable position. We've heard many stories of people who have lost major investments by trusting an Indonesian "friend" with holding the title to their purchased property.
Using a nominee to shelter foreign ownership of property is actually illegal in Indonesia. If investigated and pursued, the government could seize the land and the ownership would revert back to the state.
Single Family Dwellings - Houses
Ownership of single family dwellings faces even greater legal issues as foreigners are not allowed to own land in Indonesia. Where the home you want to purchase is part of a housing development, the developers can often work something out for you to 'purchase' a home through a long term lease agreement.
One reader writes of his positive (and successful) experience in this matter:
“Basically, I hold full title to the house, in my own name. The fact that my wife is Indonesian was not considered (in fact, my wife was not considered at all). She also owns property, and we could see no difference in the title and rights of mine. The developer owns the land the house is built on, and I own a 30-year fully paid up lease on the land, which by law the developer has to extend for a further 30 years on request. At that time they can charge me a nominal rent, which I can opt to pay for now at US $35 per year. I can sell or bequeath (but not sub-lease) the lease together with ownership of the house as I choose. The developer can sell the land, but only under the same covenants as already exist. These provisions apply to Indonesians as well, although Indonesians could purchase the land outright if the developer agreed to sell, and Indonesians could sub-lease the land if they want.
If my wife was not Indonesian, and I was not residing in Indonesia for a full calendar year, in theory the state could take my house unless I could prove that reasonable efforts to sell had failed, but just being anywhere in Indonesia for one day would re-set the clock. As my wife is the sole beneficiary of my will and is Indonesian, this rule does not apply in my case.
I purchased the house without finance; I'm not sure what effect there would be in title if you took a loan or mortgage to assist with the purchase. I would imagine getting a mortgage would be the hardest part for a foreigner, and the finance company would definitely retain powers to repossess in event of default. Such things are very closely regulated at home, but they probably have a lot more scope for legally lining their own pockets here. On the subject of payment, I paid the deposit in rupiah cash, because that's what the developer wanted at the time, but then he preferred dollars for the balance, so I paid dollars at a mutually acceptable rate. There are no restrictions on how you pay for a personal transaction - you could pay with groats (or even goats!) if you agreed upon that."
Purchase of Land by a Foreign Company
If a foreign company is recognized by the Indonesian government as a legal entity, the foreign investors can purchase either of the two types of land titles, Right to Build (Hak Guna Bangunan), is valid for 30 years and can be extended for another 20 years, and/or Right to Use (Hak Guna Usaha), which is valid for 35 years and can be extended for 20 years.
By Indonesian agrarian law a foreigner cannot legally own land in Indonesia. If someone is telling you that you can ... buyer beware ...! As a Jakarta Expat article put it "The 1960 Agrarian Law states that Indonesia’s land is a “gift from God” to the Indonesian people and the nature of this relationship is eternal. The land is a “national treasure” to be controlled by the state for the maximum prosperity of the people."
If a foreigner chooses, he/she can own land 'indirectly'. To do this you need to have an agreement between the foreigner and an Indonesian, signed with the witness of a notary public. In the agreement the Indonesian is the 'legal owner' while acknowledging that the foreigner is the 'rightful owner' of the land and thus the Indonesian owner would carry out any instructions from the foreigner regarding the land, including selling the land at certain price with the funds to be paid to the foreigner owner. Again, if the Indonesian "owner" changes their mind, you will not have any legal title to the land.
It is clear, as well, that these types of agreements are NOT at all enforceable under Indonesian law and the foreigner is at risk in the true ownership of his investment. We do NOT advise entering into this type of agreement!
All land titles within Greater Jakarta (DKI) are subject to the conditions of Presidential or Governor's decrees. Essentially, this affects the provisions for Hak Milik titles in the Jakarta DKI area.
Special Provisions for Batam
The rules for property ownership by foreign nationals in Batam fall under Decree No 068/KPTS/KA/III/1999. This regulations states that foreign nationals or companies are permitted to 100% own residential or commercial property in the Barelang area (Batam, Rempang and Galang). The only properties excluded from this decree are low cost and very low cost housing, but includes all other types of building structures.
Even though there is a “special provision” for the special economic zones in Batam and Kalimantan, the land law still falls under the “Hukum National” (Indonesian national law) and the same overall laws and principals still apply, no matter where you are in the country.
Hak Guna Bangunan vs Hak Milik
Hak Guna Bangunan is only the right to use a building for a certain period of time and then has to be extended. The owner of HGB land is the Indonesian government. HGB is also translated as - Conditional Corporate Ownership.
Only with Hak Milik do you actually own the land or building. Hak Milik does not need to be extended.
Hak Pakai allows you the use of the facilities, but not the ownership. Hak Pakai is also translated as - Conditional Ownership.
Obtaining a Loan from an Indonesian Bank to Purchase Property
The Indonesian banks will NOT lend money to property owners that only have Hak Pakai status for their property. The land title MUST be Hak Milik in order for the bank to use the title as collateral. Therefore, expats have traditionally not been able to get loans to purchase property in Indonesia, because they cannot have Hak Milik titles. This applies to everyone....even Indonesians. The normal length on house loans in Indonesia is five years, not 20-30 years as it is in the west.
Reporting of the Purchase to the Money Laundering Watchdog Agency
Beginning in March 2012, all property developers in Indonesia must report the purchase of residential properties valued at over US$55,000 to the Financial Transaction Reports and Analysis Center (PPATK). This agency is the government's money laundering watchdog. The goal of this new regulation is to deter money laundering from official corruption that was going on through the purchase of luxury residences and condos.
(1) Hanya warga-negara Indonesia dapat mempunyai hak milik.
(Only Indonesian citizens can have a hak milik - free hold land title)
(2) Oleh Pemerintah ditetapkan badan-badan hukum yang dapat mempunyai hak milik dan syarat-syaratnya.
(The Government is to determine which corporate bodies can have a hak milik and the conditions for it.)
(3) Orang asing yang sesudah berlakunya Undang-undang ini memperoleh hak milik karena pewarisan tanpa wasiat atau percampuran harta karena perkawinan, demikian pula warga-negara Indonesia yang mempunyai hak milik dan setelah berlakunya Undang-undang ini kehilangan kewarga-negaraannya wajib melepaskan hak itu didalam jangka waktu satu tahun sejak diperolehnya hak tersebut atau hilangnya kewarga-negaraan itu. Jika sesudah jangka waktu tersebut lampau hak milik itu dilepaskan, maka hak tersebut hapus karena hukum dan tanahnya jatuh pada Negara, dengan ketentuan bahwa hak-hak pihak lain yang membebaninya tetap berlangsung.
(A foreigner who, following the enactment of this Law, acquires a hak milik by way of inheritance without a will or by way of joint ownership of property resulting from marriage and an Indonesian citizen holding a hak milik who, following the enactment of this Law, looses Indonesian citizenship is obliged to relinquish this right within one year following the date the hak milik is acquired in the case of the former or following the date upon which Indonesian citizenship is lost in the case of the latter. If following the expiry of the said time period, the right is not relinquished, then the said right is nullified for the sake of law and the land falls to the State with the proviso that the rights of other parties which encumber the lands remain in existence.)
(4) Selama seseorang disamping kewarga-negaraan Indonesianya mempunyai kewarga-negaraan asing maka ia tidak dapat mempunyai tanah dengan hak milik dan baginya berlaku ketentuan dalam ayat (3) pasal ini.
(As long as one with Indonesian citizenship concurrently holds foreign citizenship, he/she cannot have land with a hak milik status, and the provision as meant in paragraph 3 of this article should apply to him/her.)
(2) Setiap jual-beli, penukaran, penghibahan, pemberian dengan wasiat dan perbuatan-perbuatan lain yang dimaksudkan untuk langsung atau tidak langsung memindahkan hak milik kepada orang asing, kepada seorang warga-negara yang disamping kewarganegaraan Indonesianya mempunyai kewarga-negaraan asing atau kepada suatu badan hukum kecuali yang ditetapkan oleh Pemerintah termaksud dalam pasal 21 ayat (2), adalah batal karena hukum dan tanahnya jatuh kepada Negara, dengan ketentuan, bahwa hak-hak pihak lain yang membebaninya tetap berlangsung serta semua pembayaran yang telah diterima oleh pemilik tidak dapat dituntut kembali.
Also, Read the full 1960 Agrarian Law
Read the 1996 law (in Bahasa Indonesia) - Peraturan Pemerintah Republik Indonesia Nomor 41 Tahun 1996 tentang Pemilikan Rumah Tempat Tinggal atau Hunian Oleh Orang Asing yang Berkedudukan di Indonesia
Flow Chart presentation regarding rights of married couples - foreigners/Indonesians to own land in Indonesia
Foreign Ownership Rights Relating to Land in Indonesia
Our appreciation to Asep Wijaya, Managing Director of Wijaya & Company, who provided the information on the Real Estate Transaction paperwork for this article.
Last updated March 24, 2020