OWNERSHIP IN INDONESIA

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

1. If you’re considering purchasing a property in Indonesia, here are the steps you can expect to follow:
2. 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.
3. 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.
4. 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.
5. Search for a property: Use a combination of online resources and local agents to search for properties that meet your budget and desired location.
6. Negotiate the price: Once you’ve found a property you’re interested in, negotiate the price with the seller or their agent.
7. Secure financing: If you need financing to purchase the property, consider your options and secure financing from a lender.
8. Hire a lawyer: It’s a good idea to hire a lawyer to review the contract and ensure that all legal requirements are met.
9. Sign the contract: Once you’re satisfied with the terms of the contract, sign the contract and pay the purchase price.
10. 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.

Conclusion

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