Please note that this is just a guide for general reference only. Please consult an appropriately qualified Indonesian Lawyer for advice on purchasing land in Indonesia.
The subject of property ownership in Indonesia is much debated and one of the very few clear facts is that only Indonesian citizens can own freehold land. However non-Indonesians may enter into lease agreements for specified time frames.
Main Methods to Purchase Land in Indonesia by Non-Indonesians
As Indonesians are the only people who can hold free hold land, non-Indonesians only have the right to lease hold. All improvements to the land i.e. houses, structures, swimming pools and vegetation can be owned by non-Indonesians.
Method 1 – Using an individual Indonesian nominee.
This is the most common method to obtain land in Indonesia, i.e. to use the Indonesian nominee to purchase the property. There is always risk’s purchasing property through a third party, this method has been used for many years and a clear process has now evolved with legal precedents being established.
At the time of acquiring the land, the Indonesian nominee signs three additional agreements with the non-Indonesian. Firstly a loan agreement that the non-Indonesian has lent to the Indonesian the purchase price of the land. This will be registered on the land the same as a first mortgage or caveat. This is then noted on both the title at the land Department and the copy held by the owner. Secondly, an irrevocable power of attorney is signed giving the non-Indonesian authority to sell, mortgage, lease the land and finally, a permanent right of use agreement is completed, giving the non-Indonesian rights to use and occupy the land.
Method 2 – Using a PMA Company
Some non-Indonesians may find the above method unacceptable due to third party ownership. Those parties purchasing a large site for development of smaller land parcels that will be individually sold may also utilise a PMA company. A non-Indonesian can effectively control 100% of the PMA company shares, but bear in mind only the HGB title is available, (land with the right of construction). This title is renewed every 20 years by payment of HGB tax. The tax is based on the change of the value of the land.
Method 3 – Leasehold Title granted to a non-Indonesian domiciled in Indonesia.
A non-Indonesian domiciled in Indonesia meeting a number of legal conditions and holding a KITAS (working visa) can enter into a 25 year lease renewable for a further 25 years.
Method 4 : General leasehold between land owner and Indonesian or non-Indonesian
Leasehold is a purchase directly between purchaser and the land owner by a lease agreement. The lease period and any future extensions are agreed to by both parties. The owner gives right to building and occupation of the land. The lease agreement is validated by a notary but is not registered at the land affairs department.