7 steps to buy property in Jakarta

Many foreigners need help buying real estate in Jakarta, as real estate transactions here are conducted differently than in many other countries. Specific laws and regulations apply that make buying an apartment, condo, or house in the capital city of Indonesia complicated. This guide explains how foreigners buy property in Jakarta in 5 steps.

Step 1: Establish a PT PMA

Foreigners looking to buy or lease property in Jakarta may find it beneficial to establish a PT PMA in the name of their foreign-owned company. The process for setting up a PT PMA can be done through the BKPM (Indonesia Investment Coordinating Board), which is the government office responsible for this. However, meeting the BKPM’s requirements may require more work for foreigners buying property in Jakarta. To simplify the process, many choose to use a local agency to set up a PT PMA, which typically takes around ten weeks and costs approximately IDR 45 million ($2,835).

Using a PT PMA makes purchasing both freehold and leasehold property possible. If buying a freehold property in Jakarta, the PT PMA becomes the legal owner of the property.

For those who want to use the property for an extended period, leasehold – known locally as Hak Sewa – is a simple and convenient option. However, it is essential to note that with a leasehold, the property is rented for an extended period rather than owned. Typically, leasehold agreements last for 25 years and can be extended for another 25 and 30 years until a maximum of 80 years.

Apart from the legal differences, there are also tax differences between owning property through freehold or leasehold arrangements. You read more about these taxes in our Indonesian property tax guide.

Step 2: Use a professional and reliable real estate agent

The Indonesian real estate market is hard to understand, especially for foreigners. Using a skilled realty agent in Jakarta can save you time and energy throughout the property buying or selling process. They also provide access to a wider range of property listings and can easily track down properties that match your criteria. As these agents are experienced negotiators, they can help you navigate tricky negotiations involving delicate matters such as repair liabilities. By acting as intermediaries, they can help smooth out any conflicting personalities between the buyer and seller

They have experience dealing with real estate contracts and know which conditions to include or remove to protect your interests. Moreover, an experienced real estate agent can help identify potential problems with a property that you may not notice, such as structural issues that may require costly repairs in the future. Spotting these issues early can mitigate future risks and make informed decisions.

Step 3: Search for a property

The next important step is finding the right property to buy. The ideal property should cater to the needs and preferences of potential guests and be located in a desirable area that is easily accessible and close to tourist attractions. Having a clear vision of the style and layout you want for your villa can help you determine the appropriate property size that will suit your needs.

Jakarta has various properties, from spacious and luxurious villas or apartments to cozy and affordable townhouses or penthouses. The city is big, so there are several areas to buy property. Depending on your budget and preferences, you can find properties in the city center, near the business district, or in quieter residential areas. A professional real estate agent or property management company can assist you in finding the right property and ensure that all legal requirements are met before making any purchase or lease agreement.

Step 4: Check the property licenses

Before you can even begin to negotiate the price or find out how to proceed with the purchase, you should first ask the seller for the following two documents:

• The Certificate of the Property
• The Building License (PBG)

If the seller cannot give those documents or finds reasons to delay their delivery, this almost certainly indicates that something is wrong. This step is very important to avoid becoming a victim of a real estate scam.

Step 5: Conduct due diligence

Conducting due diligence is crucial when buying or leasing property in Jakarta to avoid legal problems and ensure your investment is worthwhile. This involves verifying land ownership, validating licenses, and working with reputable real estate agents. Following these guidelines, you can streamline the process, negotiate a fair price, and make informed decisions about your property investment.

When conducting due diligence, always ask the following questions:

• Who is the owner?
• If the owner is a private individual, is this person married? If yes, do they have their spouse’s approval?
• Is the property inherited? If yes, are all of the beneficiaries willing to sell? How have they declared their permission to sell?
• What type of certificate the property has? Does it allow you to conduct your planned activities?
• Are the documents with the owner or at a bank?
• What are the local zoning laws?
• How much tax would you need to pay for the property?

Note that depending on the size and purpose of the transactions, you can go into much more detail.

Step 6: Sign the sales Purchase Agreement and downpayment

The Sales Purchase Agreement (SPA) is a legal document that outlines the obligations of both the buyer and seller in a property transaction. The SPA must be signed in the presence of a public notary authorized for the area (PPAT). It is crucial to ensure that the SPA safeguards your interests and that you fully comprehend all of the terms.

Signing the SPA also requires an upfront payment (in most cases). The industry norm is typically 10-30% of the total purchase price. The buyer must send the payment directly to the person listed in the certificate of ownership. If the seller insists on using a different recipient, it is best to withdraw from the transaction.

If the certificate of ownership is with a bank, it is necessary to agree on who will pay the remaining balance to the bank. It is also important to refrain from transferring the rest of the payment until the notary (PPAT) has obtained and verified the certificates.

Step 7: Final payment and pay taxes

The final transfer and the signing of the Deed Of Sell and Buy should be done in front of the public notary. Before the ownership can be transferred, both parties have to pay the transfer tax:

• Land Acquisition Tax is for the seller at a rate of 5%
• Transfer Tax is for the buyer at a rate of 5%

It is worth noting that a seller may suggest an “unofficial” price to reduce taxes. However, each property has a Tax Object Price (NJOP), which determines the amount of property taxes that must be paid. It is imperative that the transaction price is not lower than the NJOP and is regarded as “realistic” by the local government; otherwise, it may prompt an audit. You read more about it in our tax guide.

Step 8: Change of ownership

The public notary will now transfer the ownership to the buyer. This transfer is registered at the National Land Agency (BPN). The buyer will receive the Certificate of the Property, including all the property’s licenses and certificates. Both the buyer and seller receive the final sale and purchase agreement.

Obstacles when buying real estate property in Jakarta

Buying real estate costs not only money but also time and effort. This is especially true when buying real estate in Jakarta. In Indonesia, different rules apply, and the buying process is carried out in a completely different way than foreigners are used to. These are the three biggest obstacles foreigners face when buying real estate in Jakarta:

1. Finding the right property: Finding a property that fulfills someone’s wants and expectations is difficult. Foreigners may need help finding appropriate homes in Jakarta’s challenging property market. Foreign ownership limitations and restricted freehold titles for foreigners hinder the search.
2. Prepare the taxes: Foreigners buying property in Jakarta may face tax issues. Foreign property purchasers pay a transfer tax, value-added tax, income tax, and possibly construction tax or corporate tax. Preparing and paying these taxes may be complicated and time-consuming for individuals inexperienced with Indonesian taxes.
3. Bureaucracy: Foreigners who buy property in Jakarta also encounter bureaucracy. Complex laws and regulations need a lot of paperwork. Permits and licenses may take time and involve numerous government departments. Foreigners might be frustrated by the bureaucracy that slows and complicates property transactions.

You avoid these obstacles by working with a local real estate agent. These local agencies are familiar with the real estate market and know the local laws and regulations, making buying property in Jakarta much easier.

Work with a real estate agent in Jakarta

When you let a real estate agent in Jakarta assist you, you save time and avoid headaches. Imagine no more hassle in finding the right buyers or tenants, handling paperwork, or negotiating deals. The real estate agent handles property viewings, ensures smooth transactions, and helps you get the best value for your property. You can also seek assistance for just one specific aspect of the selling or renting process.

Interested? Make your real estate journey smoother, and consult with our expert real estate agent to discover the possibilities for your property in Jakarta.

Conclusion

Foreigners can buy property in Jakarta by establishing a PT PMA. With this legal entity, foreigners can buy freehold property or leasehold property. There are several areas and districts in Jakarta to purchase property. Wherever someone buys property, it’s essential always to conduct due diligence. After that, a down payment will be made, and contracts will be signed at the notary’s office.

Frequently Asked Questions (FAQs)