All You Have to Know Before Buying Property in Indonesia

Land laws, property investment policies, and rules for property ownership by foreigners also need to be considered.

how to buy property in indonesia - rumahhokie - dok
Dok. (Jakarta) – Buying property in Indonesia is quite unique, because regulations and land laws are not the same as in other countries in the world. In addition, property investment policies and rules for property ownership by foreign nationals also need to be considered so that investments can generate profits.

Read More: A Guide to Buy Property in Indonesia for Foreigners and Expatriates

Here are some things you should know before buying property in Indonesia.

Hak Milik (HM) or Right to Own
HM is the most complete land title available under the Indonesian law. HM is transferable and may be encumbered. HM is equivalent to freehold land or fee simple absolute under the common law system

Hak Guna Bangunan (HGB) or Right to Build
HGB is the right to construct and own buildings on land. HGB is transferable and may be encumbered. Land with an HGB title may be owned by (i) Indonesian citizens and (ii) legal entities established under the Indonesian law and domiciled in Indonesia, including foreign-owned companies (known as Perseroan Terbatas Penanaman Modal Asing– PT PMA). HGB is granted for a period of up to 30 years and extendable for a further 20-year period.

Read More: Transaction Process in Buying Property in Indonesia for Foreigners

Hak Pakai (HP) or Right to Use
HP is the right to use and/or to harvest from land, which is directly controlled by the State, or land of other persons. HP may be encumbered. Ordinarily, HP is granted for a period of up to 30 years and can be extended for 20 years.

Property Investment Policies
Foreigners are not able to own freehold property in their own name. Right-to-use titles, or “SHP” (Sertifikat Hak Pakai), are essentially leaseholds that are open to foreigners. Leasehold titles are granted for 25 years and can be extended for another 45 years for a total of 70 years.

The preferable way for foreign to invest and develop property in Indonesia is by way of establishing an Indonesian based company under the Indonesian law. The company shall domiciled in Indonesia. Indonesian citizen investors may get more favourable terms and conditions.

Read More: Transaction Process in buying Property in Indonesia for Foreigners (2)

Foreign Ownership For Property
Foreigner having an appropriate stay permit (Resident Foreigner) may own a house or an apartment with Hak Pakai (Right to Use). If the Resident Foreigner is deceased, the house or apartment can be inherited as long as the heir is a Resident Foreigner.

For strata title apartments (known as Hak Milik Atas Satuan Rumah Susun or HMSRS), the title of the underlying land will remain as a HGB title. The title can be converted into a Hak Pakai strata title (known as Hak Pakai Atas Satuan Rumah Susun or HPSRS).

Read More: Industrial and Residential: The Primary Focus for Investors in Indonesia

Resident Foreigners can own an en-bloc apartment once the ownership of all units have been unified and the land can be converted to Hak Pakai title.

New conditions imposed for first hand residential strata title transaction that is a HPSRS which is derived from the conversion of a HMSRS it is valid for 30 years and can be extended for 20 years + 30 years renewal.

According to the local regulation, Resident Foreigner can only purchase apartments with minimum unit price of IDR3 billions.

Anto Erawan

Source: Colliers Indonesia
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