Indonesian regulation in
property ownership

Text is freely taken from expat.or.id

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), they wouldn't have let you in the past.

In the late 90s, new laws were enacted so that foreigners are now 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.

Purchasing an apartment or office under Strata Title

Ownership of offices and apartments is possible through strata title deeds, but the set of laws and regulations that were enacted in 1996 are still somewhat unclear and ambiguous.  Therefore, to our knowledge, no foreigner has actually been able to receive a strata title certificate of ownership to reflect their office or apartment ownership.

pThe 1996 regulation (No. 41/1966) 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 deeds, and most developments hold right-to-build deeds. As it stands now, 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.

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. 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 an condominium through this type of agreement, investigate the property management company thoroughly. In the current economic downturn many property developers are undergoing 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.

Another way that you can purchase a condo is by purchasing the property and having it 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.

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 present 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 wanted."

Buying Land

By Indonesian law a foreigner can not own land in Indonesia.

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.

It is not clear, however whether or not these types of agreements are at all enforceable under Indonesian law and the foreigner is at risk in the true ownership of his investment.

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.

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.

Only with Hak Milik do you actually own the land or building. Hak Milik does not need to be extended.

Indonesian Government Regulations regarding property titles

Amendment to the Regulation of The State Minister of Agrarian Affairs/Chairman of the National Land Agency No 7/1996

"Foreigners may purchase the Right of Utilization (Hak Guna Bangunan) over land with the Right of Proprietorship (Hak Milik) from the Holder of said Right of Utilization along with houses or purchase the Right Utilization and later contract houses on it. The purchase of the Right of Utilization shall be conducted pursuant to the effective stipulations that are, by virtue of a deed made by land conveyance, which shall later be registered in the Land Office. Likewise, the requirements or construction of houses must abide by the prevailing stipulations, for example with respect to the Building Construction Permit (IMB)."

Foreigners may own a house and obtain the title on land by means of the following:

(1) Purchasing or contracting a house on land with the right utilization with the right proprietorship

(2) Purchasing an apartment unit contracted on land with the right of utilization over state land

(3) Purchasing or contracting a house on land with the right of Proprietorship or the Right of Lease over building on the basis of a written agreement with the owner of the land title concerned

Source: Bali Property

Before you decide to sign on the dotted line for any property purchase, be sure to consult with a reputable lawyer who specializes in Indonesian property ownership by foreigners to be sure you understand the legal status of your ownership. Consult your embassy or knowledgeable friends for a lawyer that they would recommend.

For more information on Foreign Ownership Rights Relating to Land

If you are interested in learning more about the legal issues of buying property in a mixed marriage ... Srikandi has compiled a 31-page booklet entitled " Pemilikan Tanah Dalam Perkawinan Campuran di Indonesia ".  It is available (in Bahasa Indonesia) for Rp 50,000.  Contact Srikandi for more information.