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Having Properties in Indonesia as a Foreigner

Having Properties in Indonesia as a Foreigner

Indonesia government targets 12 million foreign visitors in 2016, Tourism become reason for foreigner to live in Indonesia.  Foreigner not just come or visit Indonesia for a holiday. Somehow, Foreigner want to have their own property, either it is a house, villa, apartment, condos or any other kind of properties. Now, We will inform you about the rule of having properties in Indonesia as a foreigner.

According to Law Number 5 of 1960 on the “Basic Regulation Of Land in Indonesia” (UUPA) which concerning rights and procedure in Land. The Law recognized and regulated several rights over land and houses, including the Right of Ownership (Hak Milik), Right to Cultivate (Hak Guna Usaha), Right of Building (Hak Guna Bangunan), Right of Use (Hak Pakai), and Right of Building Lease (Hak Sewa Atas Bangunan).

Right of Ownership is the most comprehensive and complete form of individual rights over land. There is no time limit, and the holder has the right to use the land, including the earth underneath and the water and air above. It does not, however, include the right to obtain wealth from resources underneath the earth. Unfortunately, Right of Ownership only had by Indonesian citizens.

Right to Cultivate is the right to cultivate State-owned land or to use it for other agricultural purposes for a certain period of time. There are two kinds of Right to Cultivate: for farming enterprises that are smaller than 25 hectares and for enterprises that are 25 hectares or more. Government Regulation Number 40 of 1996 on the Right to Cultivate, Right of Building, and Right of Use (“PP 40/1996” states that the period Right to Cultivateis not to exceed 35 years initially but can be extended for another 25 years. When the extension period expires, the Right to Cultivate shall be renewed over the same land. The Right to Cultivate may only be owned by Indonesian citizens and companies established under Indonesian Law and domiciled in Indonesia.

Right of Building is a right over land, either state-owned or private, with the holder may erect and possess buildings for a certain period of time not to exceed thirty years (can be extended for another twenty years). When the extension period expires, Right of Bulding may only be owned by Indonesian citizens and companies established under Indonesian law and domiciled in Indonesia.

Right of Use is a right over land, either State-owned or private, which gives the holder the right to use and obtain the product of a certain piece of land. The land to which Right of Use is applied may be used as a building site or for agricultural purposes. PP 40/1997 states that the initial period for Right of Use is not to exceed 25 years but can be extended for another twenty years or even indefinitely if the land is still in use for a certain reason. Right of Use may be owned by Indonesian citizens, resident foreigners, Indonesian companies domiciled in Indonesia, and foreign companies that have a representative office in Indonesia. Currently it is easy for foreigners in Bali to obtain the right of use.

Right of Building Lease is a right to lease land, either State-owned or private, which gives the holder the right to use the land in return for compensation. The payment could be one-time or periodical as determined by mutual understanding between the parties. Right of Building Lease may be owned by Indonesian citizens, resident foreigners, Indonesian companies domiciled in Indonesia, and foreign companies that have a representative office in Indonesia.

The rightsways for non – Indonesian citizen to get properties are by obtain the Right of Use or Right of Building Lease.Law Number 5 year 1969 only provides very general information on how to obtain either of these rights, the maximum time period, or the legal assurances provided. As a result, many foreigners in Indonesia are not willing to engage in such transactions because they do not know the regulations or feel insecure with the regulations.

The government offers foreign investors land rights that are relevant to the nature of their business. Prospective buyers of land for any purpose should consult the local government authorities on land use, planning and zoning. Based on a Presidential Decree issued in June 1996, foreigners domiciled in Indonesia are allowed to own one residential property. To meet the regulations of ownership of a house or an apartment, a foreigner must be deemed to be “beneficial to national development” and must be either:

  • An Indonesian resident (domiciled permanently in Indonesia) in possession of a permanent resident permit
  • A non-resident (domiciled in Indonesia only at particular times) in possession of appropriate visit and immigration stamps in his/her passport.

A foreigner can purchase or construct a house built only on land with the right of use (Hak Pakai), the right of use with the right of proprietorship, or the right of lease (Hak Sewa). An apartment can only be purchased by a foreigner on land with right of use (Hak Pakai). Foreigners are not, however allowed to purchase houses or apartments classified as “low cost housing” or “very low-cost housing”.

Ownership is limited to 25 years, and can be extended for another 25 years provided that the foreigner remains an Indonesian resident or meets the status requirements. If the foreigner departs from Indonesia, the property must be sold or transferred within one year after departure. If the foreigner or his family does not use the house for more than 12 consecutive years, then the foreigner forfeits the “being domiciled” status, for the purpose of owning residential property.

Renewal of rights on expiry of the initial term is via an application to the National Land Agency and is subject to payment of a fee. An application must be submitted one year before expiry of the term. 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.

The rule if you have a company in Indonesia is Only a Foreign Investment Company (PMA) allows obtain The Right of Use or The Right of Building Lease. The PMA are allowed to own the title of property (right of use or right of Building License) for a period 25 years and have to be renewed by the government of the National Land Agency.

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