Can Foreigner Buy or Own Property in Indonesia? Legal Aspect Explained

Indonesia are known for with breathaking scenery, diverse cultural heritage and thriving economy has emerged as attractive choice for foreign investor, digital nomads and expatriates. With Indonesia bright prospect and increasing number of foreign investor in Indonesia, many foreigners find themselves drawn to the idea of buying and owning property in Indonesia major cities such as Jakarta, Bali or Yogyakarta.

The appeal of Indonesia’s real estate market is clear, however, it is crucial for individuals contemplating a substantial investment to understand the legal framework. This conversation explores the legal elements that govern property ownership, offering valuable information on regulations, the various types of properties that can be owned by foreigners, the step-by-step process of acquiring property, potential obstacles, and important factors to consider when making an investment.

Currently there is no official portal or website that cater the needs of foreign investor that want to buy or own property in Indonesia. It is no wonder that the question of potential investors remains: Can Foreigner Buy or Own Property in Indonesia? In this article, we embark on a comprehensive exploration of the legal intricacies surrounding property ownership for non-Indonesians.

Read Also : Complete Guide on How Foreigner Can Invest in Indonesia

Overview of Property Ownership Laws in Indonesia

The real estate transactions in Indonesia are built upon the property ownership laws, which serve as the fundamental basis. Prior to exploring the details regarding the ability of foreigners to purchase or possess property in Indonesia, it is essential to establish a comprehensive comprehension of the overall legal framework that governs property ownership in the archipelago before investigating the answer to can foreigner buy or own property in Indonesia.

Prior to exploring the details regarding the ability of foreigners to purchase or possess property in Indonesia, it is essential to establish a comprehensive comprehension of the overall legal framework that governs property ownership in the archipelago. The real estate transactions in Indonesia are built upon the Law Number 5 of 1960 on Basic Principles of Agrarian Regulations, which serve as the fundamental basis for any right related to land and building.

What is the Option For Foreigner Land Right Ownership in Indonesia?

In Indonesia, land ownership is regulated by a unique system that distinguishes between Hak Milik (Right of Ownership), Hak Guna Bangunan (Right to Build), Hak Guna Usaha (Right to Cultivate), and Hak Pakai (Right to Use). Hak Milik represents the highest form of land ownership, where an individual or entity has complete control and can freely use, sell, or lease the land. However, under Indonesian law, Hak Milik is primarily reserved for Indonesian citizens and certain corporate entities.

Hak Guna Bangunan (HGB) For Foreigner

For foreigners or foreign entities, the commonly utilized legal instrument is Hak Guna Bangunan (HGB), which translates to the Right to Build. Although the term “build” is used, it is a misnomer, as the right encompasses broader land-use rights, including cultivation and commercial purposes. According to the law this right grants the holder the authority to use and build on the land for a specified period, usually up to 80 years and upon expiration it can be renewed for new term.

It should be noted that according to the law this right are reserved for Indonesian citizen and Indonesian legal corporation, thus foreigners or foreign entities need to establish a Indonesian corporation called Perseroan Terbatas (PT) in order to obtain this right.  HGB holders have the authority to construct and own buildings on the land during the specified term. This structure provides a mechanism for foreigners to invest in and use land in Indonesia without direct ownership. The HGB is transferable, inheritable, and can be used as collateral for loans.

It’s important to note that while HGB provides a practical solution for foreign investors, understanding the limitations, renewal processes, and compliance with local regulations is crucial. Compliance with these regulations ensures a smooth and legally secure land and building right arrangement in Indonesia, allowing foreign individuals and corporations to participate in the dynamic real estate market.

Hak Pakai (Right to Use) As Alternative

In Indonesia, Hak Pakai is a land-use right that allows foreigners to have a legal interest in land. It is a form of usage right that grants the holder the authority to use and exploit the land for a specified period, generally up to 25 years, with the possibility of extension. This right is often utilized by foreigners who wish to invest in Indonesian real estate but are restricted from owning land outright under the Hak Milik (Right of Ownership) and right to bucategory, which is typically reserved for Indonesian citizens and certain corporate entities.

Hak Pakai is governed by regulations set forth by the Indonesian government, specifying the conditions, limitations, and procedures for its acquisition. The land under Hak Pakai can be used for various purposes, including residential, commercial, or industrial, depending on the terms specified in the granted right.

While Hak Pakai provides a viable avenue for foreign ownership and investment in Indonesian real estate, potential investors should exercise due diligence and seek legal advice to ensure full compliance with existing regulations and to navigate any potential complexities associated with this land-use right. Understanding the terms and limitations of Hak Pakai is crucial for foreigners looking to establish a secure and legally compliant presence in the Indonesian property market.

Conclusion

In unraveling the complexities of property ownership for foreigners in Indonesia, this exploration into the legal landscape aimed to provide clarity and guidance for prospective investors. The answer to the question, “Can foreigners buy or own property in Indonesia?” is nuanced, reflecting the unique regulatory framework of this dynamic archipelago.