Legal Aspects
OWNING PROPERTY
There are several points that you have to ask yourself before buying the property, such as what kind of property that I am looking for? Is it strictly investment? Is it holiday home or full time residence? Am I going to rent it out in the times I am not there? Am I planning to eventually live there?
BUYING LAND
By Indonesian law, a foreigner can not own land in Indonesia.
If a foreigner chooses, he/she can own land ‘indirectly’. To do this you need to have an agreement between the foreigner and an Indonesian, signed with the witness of a notary public. In the agreement the Indonesian is the ‘legal owner’ while acknowledging that the foreigner is the ‘rightful owner’ of the land and thus the Indonesian owner would carry out any instructions from the foreigner regarding the land, including selling the land at certain price with the funds to be paid to the foreigner owner.
ABOUT PROPERTY OWNERSHIP
Currently only Indonesian citizens may own freehold land. A non-Indonesian citizen cannot own land in Indonesia. However a foreigner can acquire a leasehold title to a building – almost the same as a strata title except that the title lasts only for 25 years with an extension of 30 years for a maximum of 55 years and then reverts to the original owner (lesser).
HOW A FOREIGNER CAN OWN A PROPERTY
Although foreigner will not be able to own freehold property (Hak Milik), However government regulations issued in 1996 allow foreigners to hold a “Hak Pakai” title (Right of Use) valid for 25 years and it can be extended up to 3 (three) times adding up to a total tenure of 100 years.
The Basic Agrarian Law recognizes several types of rights over Real Estate, all of which are outlined below. However, to the foreign investor, the following three main rights are relevant:
- Right of exploitation ( Hak Guna Usaha HGU)
- Right of building (Hak Guna Bangunan HGB)
- Right of use (Hak pakai)
A foreigner is entitled to only one “Hak Pakai” title for a property not exceeding a certain size. This “Hak Pakai” is transferable or renewable if sold to another foreigner.
HOW A FOREIGNER CAN OWN A PROPERTY
This refers to absolute ownership of land and corresponds to freehold title in common law terms. This right can only be held by an Indonesian citizen, not a corporate entity whether local or foreign. Certain legal entities designated by the government, such as a state bank, agricultural cooperatives, religious bodies, and social right of ownership is held in perpetuity. It can be sold, transferred, bequeathed, and mortgaged.
LEASE HOLD
Acquiring the leasehold (“Hak Sewa”) of a property is a straight forward approach for a foreigner. Normally between 25 – 50 years. Partnerships, With Indonesian citizen are not required in lease hold transaction. This method does offer complete protection to the foreigner during the terms of lease, however once the lease term expired the agreement can be extended or the property reverts to the owner.
Strata Titles , as condominiums and apartment complexes continue gaining in popularity, a new brand strata title,which for Indonesian citizen works like a freehold title and to a foreigner however, the developer normally will offer a 99 years lease. Excellent: Longer Leases, Potential for investment and a secure title.
NOMINEE OPTION
This is a very popular method for foreigner to own property in Indonesia.
Foreigner investor enter into a legal arrangement with an Indonesian citizen (“Nominee” as they referred to) whereby he/she hold the freehold title of the property and there are additional contract to sign in front of a qualified notary, These include the purchase contract for the property transferring the rights from previous owner to the nominee;
A loan agreement for the purchase price between the investor and the nominee and an irrevocable and transferable Power of Attorney to sell, Transfer or otherwise dispose of the property and to represent the nominee in any dispute regarding the property, given from the nominee to the foreign investor.
The nominee will also be asked to hand over all original land titles to the foreign investor.
There are 2 ways for foreigner to own the land in Indonesia:
NOMINEE
The Nominee will sign four documents with the foreigner as follow:
1. A Loan agreement: acknowledges that the foreigner has lent to the Nominee the purchase price of the land.
2. A Right of Use agreement: allows the foreigner to use the land.
3. A Statement Letter: where the Nominee acknowledges the foreigners loan and intention to own the land.
4. Power of Attorney: Nominee sign an irrevocable Power of Attorney giving the foreigner the complete authority sell, mortgage, lease or otherwise deal in the land.
5. And are availability personals name Indonesian nominee for along period or forever period to be advice
6. Our lawyers are availability
Contact Us : Arint
Mobile : +62811956327