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5 Things Expats Need to Remember About Property Ownership in Indonesia

Other than its stunning beaches, beautiful people and interesting culture, Indonesia boasts of being the largest economy in the Southeast Asian region. That said, more and more foreigners from across the world come to the archipelago and decide to settle here, sometimes marrying a native or establishing business in the local market.

Expats will look into buying property in Indonesia either for personal or commercial use. It’s important to note that by law, foreigners cannot actually own land of any kind in Indonesia. This is something you are not getting around anytime soon. More often, it is an expat’s spouse or relative who owns the land. That said, here are a few things to consider when it comes to looking at property in the country.

1. ‘Adat’ land rights

One of the first things you need to find out is whether the land you want to purchase has an adat title or a certified title. If the property you are interested in is titled under adat or traditional laws, it is not advisable to buy the property. Lands with adat ownership titles are usually inherited through the Indonesian or tribal bloodline.

2. The Basic Agrarian Law No. 5 Year 1960

Certified land ownership transactions are governed under the Basic Agrarian Law No. 5 Year 1960 through the National Land Agency (BPN) . Under this law, foreigners are only allowed the following property rights:

  • Sertifikat Hak Guna Bangunan (SHGB) – Right to Build

The SHGB is a document that establishes the right of the certificate holder to build structures on the land for up to 30 years. At the end of the term, it can be renewed for another 20 years. The SHGB should only actually be owned by Indonesian citizens and legal entities recognized by Indonesian law. If you are a foreigner and are looking to establish a company in the country, the SHGB could be an option for you. Just make sure your company is registered legally in the archipelago.

  • Sertifikat Hak Guna Usaha – Cultivation Right on Land

This certificate is similar to SHGB only that the land should be used for agricultural purposes. This document’s validity is up to 25 years and may be extended to 35 years.

  • Sertifikat Hak Pakai (SHP) – Right to Use

The SHP is similar to SHGB, except that this certificate will have a maximum validity period of 25 years and can be renewed until 80 years of use. This is usually the route taken by foreign embassies or foreign companies that are not yet registered under Indonesian law. A property with an expired hak pakai status or one that is sold to another owner regains its hak milik (freehold ownership) status.

3. About leaseholds

Some foreigners would get a hold of apartments or condominiums by signing a lease agreement with the developer. Even when the sale is done, the title would still be under the name of the developer or property management firm.

Some suggest that the safest lease certificate to get is the SHP. An SHP or Hak Pakai will bear your name on the certificate and not just that of a local representative.

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See: Property: Nightmare or Sound Investment?

4. Prenups, postnups and conjugal property

Some expats marry Indonesian nationals. If you are engaged to a local, it is recommended to draw up a prenuptial agreement (prenup) to establish the separation of your respective assets. In effect, your Indonesian spouse will still have all their property ownership rights even if you (a foreigner) cannot legally have these rights.

If you have already married an Indonesian without a prenuptial agreement, you may want to consider getting a post-nuptial agreement (postnup). This document is not the same as drawing up a back-dated prenup, which is illegal. A postnup can also be used to execute the separation of your individual assets, but is only effective on a date after marriage.

In the case of mixed nationality marriages without either a prenup or postnup, the property that the Indonesian spouse owns (with hak milik certification) becomes the couple’s conjugal property. But since it is illegal for a foreigner to have a hak milik property, the couple may have to sell the property within a year after your marriage or convert the title under the Indonesian spouse’s name with hak pakai status.

Unfortunately, converting the title to hak pakai is not the same as owning the property. Therefore, the best route to take is getting a division of assets between you and your spouse, one way or another, to ensure your partner’s right to own. 

In the case of your spouse passing away, the Indonesian government has the right to take your conjugal property if you do not have a legal prenup or postnup document.

5. Recent Regulations

Regulation No. 13 of 2016 of the BPN has expanded the rights of foreigners to own homes in Indonesia. The regulation states that expats may purchase homes in the country provided that the property reaches a certain minimum price level. For instance, you may only purchase houses or apartments that are Rp.10 billion or above in Jakarta. Other districts will have various price pegs. It’s important to note that you will in effect own the structure that sites on the land, but not the actual land itself. 

Aside from price levels, there are other requirements for purchasing a house or apartment in the country. The foreigner and his or her family must have residency status. Secondly, the property should be purchased from the government or a developer.

Image credits: Mr. Wallpaper, Pinterest

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