If you decide to buy a property in Indonesia or rent it for a long time, then you have several options for getting the right to property, but it is worth emphasizing that in Indonesia there are restrictions on the ownership of real estate by foreign nationals.
Or «Freehold» property option only for individuals of Indonesian Nationality, neither limited liability companies (PT/Perusahaan Terbatas) nor foreign individuals may obtain land with a Hak Milik title. It is common practice to have an Indonesian representative acquire land for the foreign buyer, but the most illegal one.
Or “Right to use”. Foreigners eligible to own houses in Indonesia for the designated period are those non-Indonesians who live or work in Indonesia or in other ways bring advantage to the country (for example investors). The foreigners must be a resident or domiciled in Indonesia and therefore must hold a limited stay permit (KITAS) or a permanent stay permit (KITAP) to acquire a Hak Pakai title.
Hak Pakai title is the only registered form of entitlement over land that can be granted to a foreign individual that can be evidenced by a land certificate reflecting the name of the foreigner and the term on the certificate which serves as formal evidence of this form of ownership right. This title can be sold, gifted, exchanged and/or bequeathed, unless the deed of conveyance specifies otherwise, but under a Hak Milik title, it cannot be used in the form of a mortgage.
On 28 December 2015 this new regulation came into effect according to the statement on the website of Indonesia’s Cabinet Secretary: the expats can now buy either a landed house or an apartment in Indonesia. However, there are certain requirements and conditions that are important to take into consideration. Based on the new regulation an expat can buy a landed house under the right-of-use category for an initial period of 30 years. After this period, the foreigner can extend the ownership twice, once by 20 years and then extend it by a further 30 years (hence ownership can reach a total of 80 years). Moreover, ownership of the house is inherited by the foreigners’ offspring.
However, if the foreigner (or its heir) leaves Indonesia to reside in another country, then he/she needs to release or transfer the ownership rights to another person who meets all requirements to own the property in Indonesia (this can be another foreigner or an Indonesian citizen) within one year after departing from Indonesia. If ownership is not released within one year after the expat has left Indonesia, then the Indonesian government has the right to confiscate the house.
HAK GUNA BANGUGAN
Or “The Right to Build” (HGB) is available to PT PMA companies. The right to build or construct on land is valid for 30 years. This can be extended for an additional 20 years, and even for another 30 years after that.
This title entitles the holder to construct and own buildings or other structures on the land in state-owned land (Tanah Milik Negara), freehold land (Hak Milik) and HPL (Hak Pengelolaan) land. This is the most common title for residential, commercial and industrial properties.
PT PMA is a “status of doing business” in Indonesia. A PMA company has 30 years to operate after formation. It can be granted additional 30 years, and another 30 years, if it expands its project through additional investment. This can be 100% controlled by a foreigner.
Setting up a PMA company takes 2-3 months and once completed the company can apply for work permits for the foreign directors, 3 permits in the first year of operation. An HGB title can be sold, gifted, exchanged or bequeathed by an Indonesian and/or encumbered by a mortgage.
Or “Leasehold” is the right to rent land for building purposes or villa, apartments and other type of properties by a fixed period of time.
Leasehold is the easiest, legal and safe type of owning Indonesian property. It is also much cheaper than Hak Milik, Hak Pakai or HGB. Leasehold provides all benefits of using the property for return of investment without making a rebuilding fund.
The period of lease is generally around 25 years and usually there is an option to extend the lease, which will be specified in the agreement. The leasehold contracts with more than 3 years duration are strongly reccomended to be proved by Notary. This will cost another 1% of contract summary, but it worth to be done.
Hak Sewa cannot be used in the form of a mortgage, nor can it be registered with the National Land Agency. A foreigner may lease an empty plot of land under once name, build permanent buildings on the land and resell the remaining balance of the lease term to any third party by a sub-lease or transfer a Leasehold Right.
Or “Strata Title” (“SERTIFIKAT HAK MILIK ATAS SATUAN RUMAH SUSUN” OR “SHMASRS”). The deed or right of use for the multi-storey buildings of residential, commercial or retail units such as condominiums, offices and trade centres. The title’s validity period depends on the expiry date of the land right of the plot on which the building is located.
RENEWAL OF RIGHTS
An application must be submitted one year before expiry of the term to the National Land Agency and is subject to payment of a fee. Although the law is silent in regard to the period after the expiry of the extended terms, the consensus is that a land right can be extended if there has been no infringement of the conditions attached to its usage.
PROPERTY SALES TAX
When property is sold there is tax to be paid by both the selling and the buying party. This is 5%, for each, over the amount that is on the sales contract. Please note that the amount on the sales contract can be different from the actual price agreed upon. The tax has to be paid to the notary handling the transaction. Usually sellers agree to pay they part of tax, but please ask how sales tax will be handled before the deal. Many foreigners got an unpleasant surprise after agreeing on a price and hearing of the extra tax.