How can foreigners buy property in Indonesia?

Many foreigners want to buy property in Indonesia. The country has been one of Southeast Asia’s most popular tourist destinations for years, so it’s no wonder many people dream about owning property in the tropics of Indonesia. The dream doesn’t have to stop there because foreigners can buy and own land and property in Indonesia, although it’s not easy. Still, in just eight steps, foreigners can buy and own real estate in Indonesia.

Can foreigners buy property in Indonesia?

Foreigners can buy property in Indonesia, although it’s more challenging than many hope. It’s important to know that the right of fully owning land or property in Indonesia is called Hak Milik (HM), which is a form of ownership only Indonesian passport holders can obtain. In English, Hak Milik means ‘Right to Own’ and applies to land and real estate structures.

The Indonesian government wants its residents to benefit from the growing economy by protecting the housing market from extensive foreign investors. That’s why owning land or property entirely is only possible with an Indonesian passport. However, foreigners can buy and own property in several other ways in Indonesia.

What you need to know about Indonesian real estate laws

When it comes to Indonesian real estate laws, it’s important to know that there are several ways foreigners can buy property in Indonesia:

1. Invest in property through a PT PMA
2. Buy leasehold property
3. Buy under a Hak Pakai title
4. Buy under a Hak Guna Bangunan title
5. Buy with a passport
6. Buy through an Indonesian nominee

1. Invest in property through a PT PMA

PT PMA (Perseroan Terbatas Penanaman Modal Asing) is a foreign-owned company that can conduct business and buy property in Indonesia. Foreign investors can establish a PT PMA and acquire freehold or leasehold property through the company. Most foreigners opt for this option, as it is one of Indonesia’s safest ways of property ownership. One of the benefits of buying through a PT PMA is that it allows obtaining an Investor KITAS, which is a two-year residency permit.

Setting up an Indonesian PT PMA takes around six to ten weeks, and costs between IDR 15 million ($945) and IDR 35 million ($2,205). Legal agents in Indonesia can assist in creating a PT PMA.

You may need additional land titles and certificates before using, building, or renting PT PMA-purchased property. The most important title for PT PMAs is Hak Guna Bangunan (HGB), which allows legal entities such as PT PMAs to build and own freehold property on leased land. This makes acquiring land through leasehold and constructing a freehold building possible.

Do you want to start property rentals, a restaurant, or any other type of business? Depending on the industry your business is in, you might have to apply for additional licenses.

2. Buy leasehold property

Foreigners can buy Indonesian real estate through a leasehold agreement. This gives an individual or legal entity the right to own and use real estate for a certain period. They can use the property for residential or commercial purposes. Buying a property through leasehold instead of freehold can be smart, as this option is often cheaper.

Many foreigners use a PT PMA to lease land and later construct a house on top of it. In most cases, a leasehold agreement is valid for 25 years and can be extended for another 30-year and 25-year period, up to 80 years.

3. Buy property under a Hak Pakai title

Hak Pakai (HP), meaning Right to Use, is a title that gives foreigners and Indonesians the right to buy and use a property. The ownership only applies to the building or unit, and not all properties can be bought under Hak Pakai. One of the criteria for foreigners to buy property in Indonesia under a Hak Pakai title is having a residency permit in Indonesia, such as KITAS, KITAP, or a Second Home Visa.

Indonesian nationals who hold property through Hak Milik can, if the property is eligible for it, transfer the land title to Hak Pakai for it to be sold to a foreigner. The Hak Pakai certificate is valid for an initial period of 30 years and can be extended to 80 years. The title can be sold or transferred to another eligible foreigner as long as it’s valid.

4. Buy property under a Hak Guna Bangunan title

Hak Guna Bangunan means Right to Build and is a land certificate that gives the holder the right to own a property built on someone else’s land. Usually, the land is owned by an Indonesian national, business, or government. The HGB title can only be obtained by Indonesian nationals or companies, such as a PT PMA. This means an individual foreigner can’t buy a property under the Hak Guna Bangunan title.

5. Buy property with a passport

The Indonesian government announced in 2023 that foreigners can buy Indonesian property with just a passport. A residency permit or a foreign-owned company is not needed, although other requirements exist. A foreigner can own one plot of land with a maximum size of 2,000 m², and the property must have a minimum value, depending on the region.

Landed houses must have a minimum value of:

• Jakarta, Banten, West Java, Central Java, East Java, Special Region of Yogyakarta, and Bali: IDR 5 billion ($315,000)
• West Nusa Tenggara: IDR 3 billion ($189,000)
• North Sumatra, East Kalimantan, South Sulawesi, Riau Archipelago: IDR 2 billion ($126,000)
• Other regions or provinces: IDR 1 billion ($63,000)

Flats and apartments must have a minimum value of:

• Jakarta: IDR 3 billion ($189,000)
• Banten, West Java, Central Java, East Java, Bali, Special Region of Yogyakarta: IDR 2 billion ($126,000)
• Other regions or provinces: IDR 1 billion ($63,000)

6. Use an Indonesian nominee

Another way foreigners can buy property in Indonesia is by using an Indonesian nominee, as Indonesians can acquire real estate through Hak Milik, the highest form of property ownership in Indonesia. Buying through an Indonesian nominee means the Indonesian national officially owns the property on paper. At the same time, there is an agreement between the foreigner and the Indonesian nominee that states the foreigner as the actual owner.

Still, regardless of any agreements, the Indonesian nominee remains the legal property owner according to Indonesian real estate law. Using an Indonesian nominee to buy property in Indonesia is, in fact, illegal. Nominees can be used for business purposes only, not to bypass the foreign land ownership ban. If the government finds out, they may reclaim the property.

8 steps for foreigners to buy property in Indonesia

Buying or leasing property in Indonesia can be complicated, especially for foreigners unfamiliar with local regulations and customs. A few key steps can simplify the process and make informed decisions about your property investment.

Step 1: Establish a PT PMA

Establishing a PT PMA allows foreigners to buy or lease property in Indonesia. The process involves meeting the requirements of the Indonesia Investment Coordinating Board (BKPM), which can be time-consuming and complex. Many use a local agency to set up a PT PMA to simplify the process.

Step 2: Use a professional and reliable real estate agent

Working with a skilled real estate agent can help you save time and energy and gain access to a broader range of property listings. They can also help negotiate the purchase or sale of the property and ensure that your interests are protected.

Do you want to buy property in Indonesia? With our expert team, you won’t have to navigate the complexities of the Indonesian market alone. For further information on how we can assist you, kindly email us at [email protected].

Step 3: Search for a property

Finding the right property to buy or lease involves considering location, size, materials, and style. Depending on your budget and preferences, you can find properties in the city center, near the business district, or in quieter residential areas. Use our property platform to find a property that meets your wishes.

Step 4: Check the property licenses

Before negotiating the price or proceeding with the purchase, it is essential to ask the seller for two crucial documents: the Certificate of the Property and the Building Approval (PBG). If the seller cannot provide these documents, it could indicate that something is wrong.

Step 5: Conduct due diligence

Conducting due diligence is crucial to avoid legal problems and ensure the worth of your investment. This involves verifying land ownership, validating licenses, and reviewing the contract.

Step 6: Sign the Sales Purchase Agreement and make a downpayment

The Sales Purchase Agreement (SPA) is a legal document that outlines the obligations of both the buyer and seller in a property transaction. It must be signed in the presence of a public notary authorized for the area (PPAT). Signing the SPA requires an upfront payment, typically between 10% and 30% of the total purchase price. It is crucial to ensure that the SPA safeguards your interests and that you fully comprehend all of the terms.

Step 7: Finalize the transaction

The final stage of the property purchase process involves the transfer of ownership from the seller to the buyer, done in the presence of a public notary. Before the transfer, the buyer must pay the Transfer Tax (BPHTB). The notary won’t sign the agreement if the BPHTB isn’t paid, which means it’s essential to pay all taxes on time.

While some sellers may suggest an unofficial price to minimize taxes, it is essential to note that each property has an NJOP (Nilai Jual Objek Pajak). The NJOP is the average price obtained during the real estate transaction that determines the amount of property taxes that must be paid. For further information on property taxes, please refer to our tax guide.

Step 8: Ownership transfer

The public notary will transfer ownership to the buyer upon completion of the payment and tax obligations. This transfer will be registered at the National Land Agency (BPN), and the buyer will receive a Certificate of the Property that contains all the pertinent details related to the property. With the transfer of ownership complete, the buyer is now the legal owner of the property.

Is it possible to obtain ownership of land through marriage?

An Indonesian citizen married to a foreigner (in or outside Indonesia) may lose their rights to Hak Milik under the Indonesian Marriage Law of 1974. Indonesian law grants mixed couples equal property rights, and as foreigners don’t have the right to Hak Milik, the couple will lose their rights to Hak Milik.

To avoid losing property rights, the couple can sign a prenuptial agreement to share their assets, such as a postnuptial or post-marital agreement. The Indonesian Marriage Law does not cover this, but the agreement is still valid. The Indonesian spouse can buy and own property in Indonesia with the agreement. When the Indonesian spouse lawfully possesses property, the foreign spouse can purchase and own it. Indonesian spouse is a property nominee.

Buy property in Indonesia with Own Property Abroad

Do you want to buy property in Indonesia? Own Property Abroad can assist you and ensure a seamless and hassle-free property journey. Thanks to our extensive knowledge and local experience in the Indonesian market, we can help with legal requirements, finding suitable properties, negotiating the best deals, and conducting due diligence.

With our expert team, you won’t have to navigate the complexities of the Indonesian market alone. For further information on how we can assist you, kindly drop your details below or email us at [email protected]. Let’s start working on your property success story today!

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