In terms of owning property in Indonesia, it can be in the form of the land and the building. Specifically for the land, the regulations provide 3 (three) types of land strata title. There are Right to Use (Hak Pakai), Right to Build (Hak Guna Bangunan), and Freehold Title (Hak Milik). The key difference between the three of them is the validity period. The freehold title can be owned for an indefinite time but however it only reserves for an Indonesian citizen. Meanwhile, the other land title which are right to use and right to build are possible to be held by foreigners. The Right to Use is for foreign individual and legal entity; meanwhile, the Right to Build can be owned by the foreign investment of the Indonesian legal entity – (“PT PMA”).
The ownership of the Right to Use can be granted to the foreigners with certain requirements and limitations such as the minimum amount of transaction, the maximum size of the land, and the possession of the Temporary Stay Permit (KITAS) and Permanent Stay Permit (KITAP). In this article, we will elaborate on the provisions to hold the property for foreigners based on the Government Regulation No. 18 year 2021 and Minister of Agrarian and Spatial Planning/Head of The National Land Agency (“BPN”) of the Republic of Indonesia Regulation Number 18 of 2021.
Other than that, we will also elaborate on the property ownership through foreign investment which is known as PT PMA.
OWNING PROPERTY DIRECTLY
According to the Indonesian agrarian law, foreigners who are domiciled in Indonesia and foreign legal entities that have representatives in Indonesia can have land rights in the form of Right to Use (Hak Pakai). Right to Use can be granted on a state owned land, on a right to manage land, or on a freehold title land. The Land to Use Rights is valid for 30 (thirty) years and can be extended for another 20 (twenty) years and can be renewed for a maximum of 30 (thirty) years.
Rights to Use is granted with definite time or indefinite time. Right to use with definite time can be granted to:
- Indonesian citizen;
- Legal entity established under Indonesian law and having domicile in Indonesia;
- Legal entity that has a representative in Indonesia;
- Religion and social institution; and
Right to use indefinite time can be granted to:
- Central government institution;
- Regional government;
- Village government; and
- Foreign country representative and International body representative.
Therefore, the land cannot be used other than as mentioned above.
 According to Article 49 Government Regulation No. 18 of 2021
Foreigners can own a house or residence if they have an immigration document, i.e visa, passport or stay permit. The house or residence is in the form of a landed house or commercial apartment.
The ownership of the apartment must be commercial (subsidized apartments are prohibited) meanwhile the landed house has minimum requirements as below:
- a house with a luxury house category in accordance with the provisions of the legislation;
- 1 (one) plot of land per person/family. In terms of having a positive impact on the economy and social, the landed house can be granted for more 1 (one) plot of the land or more than 2.000m2 with permission from the Minister; and/or
- the maximum land area is 2,000 m2 (two thousand square meters).
If the land title of the landed house is freehold title or right to build, the foreigner must change the land title to right to use by making an agreement with the owner of freehold title regarding the granting of the right from the owner of freehold title to the foreigner before Land Deed Official (Pejabat Pembuat Akta Tanah / PPAT). Such agreement shall be registered to the BPN so that BPN will issue the Right to Use Certificate in the name of the foreigner.
The regulation does not provide any minimum price which is categorized as a luxury house. However, you may anticipate a regulation in each region/province/city to set out the minimum price of a luxury house category.
OWNING PROPERTY THROUGH A PT PMA (foreign limited liability)
Owning property through a PT PMA is the most preferred choice. As through a PT PMA, the PT PMA can own the property directly and therefore it will no longer need any nominee to hold the property, Own property through the PT PMA will be more secured, safer, and still comply with the Indonesian property ownership regulations.
The land title that can be held by a PT PMA is Right to Build (Hak Guna Bangunan – “HGB”). The PT PMA cannot hold the freehold title as it only reserves for the Indonesian citizen. The HGB is valid for 30 (thirty) years and can be extended for another 20 (twenty) years and can be renewed for another 30 (thirty) years.
Under the HGB, the PT PMA can fully own the land (within the specified time period as mentioned above) and is entitled to develop the building. Both land and its building are owned by the PT PMA. The PT PMA can also sell to the other third party who is allowed to own the property, including to sell to the Indonesian person. If selling to the Indonesian person, the title of the land can be transferred from HGB to HM.
The structure of ownership through a PT PMA might be different from one another. Therefore, it is best to discuss hence we can assist to structure your property ownership in Indonesia.
Disclaimer: This article is for information purposes only and does not constitute any legal advice. For more details on how we can assist you with property ownership, please reach us below.