OWNERSHIP IN INDONESIA
Invest Islands has spent significant time and resources to establish the correct legal structure to ensure full compliance with Indonesian foreign ownership laws as well as Hong Kong (Commonwealth) investment regulations, to ensure safe and secure land ownership in Indonesia.
Penanaman Modal Asing | PMA
Our investors typically take an active interest in thoroughly researching what it entails to make an investment in a developing country like Indonesia.
We encourage our clients to do their own due diligence. However, we pride ourselves on explaining the ins and outs of Indonesian law and property ownership, so you are fully engaged in the process from the outset.
With our professional advice and personalized service, the details of Indonesia’s foreign ownership laws and regulations are easy to navigate and understand, making investment in one of the world’s most idyllic locations clear and painless.
If you’re considering purchasing property in Indonesia, it’s important to understand how real estate ownership works in the country. In this article, we’ll explore the process of property ownership in Indonesia, including the types of property ownership available and the steps involved in purchasing land and villa properties.
Types of Property Ownership in Indonesia
1. Freehold ownership: Freehold ownership, also known as hak milik, is the most comprehensive form of ownership in Indonesia. It allows the owner to hold the property indefinitely and to transfer ownership to others through sale or inheritance. Freehold ownership is only available to Indonesian citizens or foreign investors who have obtained the necessary permits.
2. Right of use (Hak Guna Bangunan): The HGB title, which literally translates as right to use, is the most preferred and safest way for foreigners to own properties in Indonesia, and it offers several key advantages.
Firstly, with the HGB title, foreigners gain full ownership rights over the land. This means they have control and can utilize the land according to their needs. Additionally, foreigners also acquire ownership of any buildings constructed on the land, providing them with security and control over their investments.
Furthermore, HGB title grants commercial rights to operate businesses, rentals, and generate income. Foreign investors can establish and manage their ventures without restrictions, enabling them to tap into the Indonesian market’s potential. Along with the commercial benefits, obtaining HGB title also comes with the advantage of being able to pay taxes as a legal entity, ensuring compliance with Indonesian tax regulations.
Notably, it’s important to mention that the HGB title does not require the involvement of an Indonesian nominee.
This eliminates complexities and uncertainties that can arise from such arrangements. Foreign investors with HGB title can obtain a director/investor’s visa (KITAS), facilitating prolonged residence in Indonesia. This visa enables investors to oversee their properties and investments in person, fostering a more hands-on approach to management and decision-making.
3. Hak Sewa: It’s a flexible pure leasehold ownership, Hak Sewa providing a versatile alternative for both residential and long-term sublease commercial purposes. This type of leasehold can follow a similar 80-year period as the HGB title, depending on the agreed duration outlined in the lease agreement.
Hak Sewa allows individuals to enjoy the benefits of long-term leasehold while maintaining flexibility. Residential leases offer a comfortable living arrangement, while commercial leases cater to subleasing options based on the agreed terms. The duration of Hak Sewa is determined by the lessor and lessee through a mutual agreement. Both parties negotiate and establish a specific timeframe that suits their needs and preferences.
This flexibility allows for tailored lease periods that align with the lessee’s requirements. It is important to note that Hak Sewa does not provide full ownership rights over the property like the HGB title. Instead, it offers a secure and agreed-upon tenancy period with certain obligations and rights for both lessor and lessee.
Steps Involved in Purchasing a Property in Indonesia
- If you’re considering purchasing a property in Indonesia, here are the steps you can expect to follow:
- Research the market: Research the real estate market in the area where you’re considering purchasing a property to determine the average price of properties and the types of properties available.
- Find a reputable agent: It’s a good idea to work with a reputable real estate agent who has experience in the Indonesian market. They can help you navigate the process and ensure that you’re making a sound investment.
- Determine your budget: Determine how much you can afford to spend on a property, taking into account your other financial commitments and the costs associated with purchasing a property in Indonesia.
- Search for a property: Use a combination of online resources and local agents to search for properties that meet your budget and desired location.
- Negotiate the price: Once you’ve found a property you’re interested in, negotiate the price with the seller or their agent.
- Secure financing: If you need financing to purchase the property, consider your options and secure financing from a lender.
- Hire a lawyer: It’s a good idea to hire a lawyer to review the contract and ensure that all legal requirements are met.
- Sign the contract: Once you’re satisfied with the terms of the contract, sign the contract and pay the purchase price.
- Obtain a land certificate: In order to complete the purchase process, you’ll need to obtain a land certificate, also known as a “sertifikat hak milik”, which serves as proof of ownership.
Property ownership in Indonesia offers a range of options for both Indonesian citizens and foreigners, including freehold ownership, right of use, and leasehold ownership. The process of purchasing a property in Indonesia involves researching the market, finding a reputable agent, determining your budget, searching for a property, negotiating the price, securing financing, hiring a lawyer, and obtaining a land certificate. If you’re considering purchasing a property in Indonesia, it’s important to understand the process and ensure that you have the most professional legal assistance for a smooth land ownership process within the Indonesian law framework
Property Ownership in Indonesia Under
a Foreign Investment Company
The right to build title (Hak Guna Bangunan or HGB) gives the holder the right to possess land for an 80-year period, with the freedom to construct and develop buildings on the land during that period. HGB can be owned by Indonesian individuals or by a legal entity, including a PMA-licensed company. A PMA company may be up to 100% foreign-owned, thereby allowing a foreign investor to have direct legal control over the company and its business activities.
For foreign investors, when it comes to land ownership in Indonesia, the best solution in terms of cost and peace of mind is to purchase land through an existing PMA. Invest Islands offers a full-service agreement between the PMA and individual investor that specifies amounts, duration of investment hold, security of investment, and exit strategy.
If a buyer decides to develop their land holdings, the PMA structure will even allow them to fully own, develop and control the property within the lawful term of the HGB. It will also allow them the freedom to sell any interest in the property offshore should they wish to do so.
Lease agreements will be registered directly in the buyer’s name without the need for an Indonesian nominee. A PMA is a business that has to be compliant with the regulations of the BKPM (Indonesia’s Investment Coordinating Board). This ensures it is a more secure method of investing compared to using an individual nominee.
How to Set Up a PMA Company in Indonesia
This free downloadable “How To…” guide is the first part of a step-by-step legal manual to investing in Indonesia. Focused on establishing a PMA, it includes an introduction to corporate structures and a guide on how to start a foreign investment company in Indonesia. We define what a PMA is, list the requirements for starting one, and what you can expect post-establishment.
With our professional advice and personalised service, the details of laws and regulations for land ownership in Indonesia are easy to navigate and understand, making investment in one of the world’s most idyllic locations clear and painless.
Investing in Indonesia through a company is one of the safest options available, allowing you to remove risk and comply with Indonesian law. For foreign investors, the best solution in terms of legality, cost, and peace of mind is to consult with experienced professionals to guide you through the process and ensure your investment roadmap is clear, long-term, and structured.
Understanding Your Visa Options in Indonesia
Our “Guide to Understanding your Visa Options in Indonesia” is part two of our step-by-step legal manual to investing in Indonesia. It includes an introduction to the various different types of visas available.
For each type of visa, we cover its purpose, requirements, validity, extension eligibility, and how to apply.
Obtaining a visa in Indonesia is a simple process that you can undertake yourself. Or you can acquire the services of an agent or lawyer, the latter option costing more but reducing time and stress.
With our professional advice and personalised service, the details of Indonesia’s immigration and visa laws and regulations are easy to navigate and understand, making land ownership in Indonesia, one of the world’s most idyllic locations, clear and painless.
Legal Framework for Land Titles in Indonesia
This explanatory guide to understanding the land titles available in Indonesia is the third part of our step-by-step legal manual for investing in Indonesia. Land titles and property rights acquired by foreigners are governed by Law No. 5 from 1960 regarding the Basic Principles of Agrarian Law.
The guide includes an introduction to the different types of land titles and describes which ones are relevant for foreigners. For each land title, we cover the applicable legislation, duration, purpose, and who is eligible to acquire each title.
With our professional advice and personalised service, the details of Indonesia’s property laws and regulations are easy to navigate and understand, making land ownership in Indonesia clear and painless.
Legal Guide to Tax Regulations in Indonesia
Our guide to understanding the tax regulations of Indonesia is the fourth part of our step-by-step legal manual to investing in Indonesia. It includes an introduction to the various tax compliance matters.
Taxes in Indonesia are straight forward, however are wrapped within a complex framework. We highly recommend seeking the help of a certified professional. Our team is happy to connect you with or merely recommend experts.
Advisory disclaimer: Please note that neither Invest Islands nor Seven Stones is a certified tax consultant and the information contained in this guide is introductory and based on publicly available information. For specific tax advice, please consult with a registered tax professional.
With our partner’s professional advice and personalised service, the details of Indonesia’s taxation laws and regulations are easy to navigate and understand, making investment in one of the world’s most idyllic locations clear and painless.