Can a Foreigner Buy Property in Indonesia?

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“Foreign ownership of houses or apartments falls under the Right of Use category, locally known as Hak Pakai, which is weaker than the Right of Ownership category (freehold) or Hak Milik that can only be acquired by Indonesian citizens which is in accordance with the prevailing land law and regulations in Indonesia.”

Indonesia is regarded as one of Asia’s most promising emerging markets, in addition to its beautiful natural attractions and diverse culture. In this globalisation era, it is inevitable that foreigners want to come to this country, whether it’s for investment or tourism purposes.

Foreigners can choose to invest in various kinds of sectors in Indonesia. The property sector, for example, is a great investment opportunity for either commercial or personal purposes, as it is considered as one of the safest investment instruments and can be utilised for other purposes.

Previously, Indonesian law gave foreigners very limited access to own property. However, on December 28, 2015 the government set new requirements and procedures to allow foreigners to own property.

To support Indonesia’s domestic economic growth and attract private foreign investors to invest in the property sector, the Indonesian Government set forth Government Regulation No.103 of 2015 on Ownership of Dwelling of Residency House by Foreigner Domicile in Indonesia (Regulation 103).

In addition, to provide a technical guide for Reg 103, The Minister of Agrarian Affairs and Spatial Planning/Head of National Land Agency (Ministry of Land), issued Regulation No. 13 of 2016 on the Procedure for Granting, Releasing, or Transferring Land Rights over Residential Houses to Foreign Nationals in Indonesia (Regulation 13) on March 2016.

However, on September 29, 2016, the Ministry of Land revoked Regulation 13 and replaced it with Regulation No. 29 of 2016 on Procedure for Granting, Releasing, or Transferring Land Rights over Residential Houses to Foreign Nationals in Indonesia (Regulation 29), which is considered to be more “investor friendly”.

Regulation 13 was replaced because it did not receive a positive response from investors as expected. Some of the articles were considered hard to be implemented. For example, Regulation 13 did not allow foreigners to purchase second-hand properties.

By issuing Regulation 29, the Indonesian government allows foreigners who work or reside legally in Indonesia to own houses or apartments in the country for a period up to 80 years and the property can be part of a will during the ownership period.

However, foreign ownership of houses or apartments falls only under the Right of Use category, locally known as Hak Pakai, which is weaker than the Right of Ownership category (freehold) or Hak Milik that can only be acquired by Indonesian citizens in accordance with the prevailing law and regulation in Indonesia.

Other than that, there are several requirements and consequences for foreigners who own property in Indonesia, and it has been stipulated in Regulation 29 as follows:

  1. There is a set fixed minimum price for the property per region.
  2. The property can be purchased from second-hand sellers with certain criteria.
  3. Foreigners and their families are only allowed to have a maximum of one property.
  4. Limited to a maximum of 2000 Sqm land size (for houses).
  5. Property can be mortgaged in a bank or Indonesian financial institution.
  6. Must maintain their stay permit visa during their property ownership period.
  7. When leaving Indonesia, the foreigner must release or transfer the Right of Use to another person who meets all requirements to own property in Indonesia (this can be another foreigner or an Indonesian citizen) within one year after his or her departure from Indonesia.
  8. Foreigners can buy a house in Indonesia for an initial period of 30 years, which can be extended by another period of 20 years and then can be renewed for another 30 years.

At the end of 2017 the Indonesian government was rumoured to be proposing a new provision in a land bill that will allow foreigners to own properties under the Right to Build category or Hak Guna Bangunan. Right to Build allows the owner to build and own the building. It is far more advantageous for foreigners and also has a higher status than the Right of Use. However, there has not been any stated regulation yet regarding this matter.

 

All information was provided by Elson.

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