How Can Foreigners Buy A House in Indonesia?

Indonesia is an attractive destination for foreigners seeking to invest in property. Its stunning landscapes and vibrant culture make it a prime choice for real estate investment.

However, navigating property ownership for foreigners in Indonesia can be complex due to regulations like Hak Pakai (Right to Use) and other aspects of Indonesian property law. Let’s explore the costs, challenges, and benefits of buying property in Indonesia.

Can Foreigners Buy a House in Indonesia?

Yes, foreigners can buy property in Indonesia, but with specific restrictions. Full ownership, known as Hak Milik (Freehold), is exclusive to Indonesian passport holders. However, foreign investors can acquire property through alternative arrangements:

• Hak Pakai (Right to Use): A renewable right for foreigners to use state-owned land.
• Leasehold arrangements: Long-term leases, often up to 30 years or more, are available for residential properties.

While these options allow foreign investment, compliance with Indonesian property law is crucial to ensure a seamless process.

Is Buying Property in Indonesia a Good Investment?

Investing in real estate in Indonesia offers numerous advantages. From enticing investment potential to flexible leasehold options, here’s a concise breakdown:

• Lucrative Investment Potential: Indonesia’s thriving economy presents opportunities for property value appreciation.
• Tourism and Retirement Appeal: Ideal for retirement or vacation homes, offering diverse attractions and landscapes.
• Leasehold Flexibility: Long-term lease options provide secure land use without full ownership complexities.
• Convenient Condominium Ownership: Straightforward ownership under the “Hak Pakai” title for clear legal frameworks.
• Business Expansion Opportunities: Establishing a local entity facilitates property ownership for business expansion.
• Participation in Economic Growth: Contribute to and benefit from Indonesia’s economic growth through real estate.
• Rental Income Potential: Rent a property, especially in popular tourist destinations.

How Much Does It Cost to Buy a House in Indonesia?

The cost of property in Indonesia varies significantly based on location:

• Jakarta: Prices for apartments and homes range from IDR 10 million to 40 million per square meter, depending on the neighborhood.
• Bali: Villas are highly sought after, with prices starting from USD 200,000 for a modest property and climbing to millions for luxury homes.
• Surabaya, Yogyakarta, and Bandung: More affordable options range from IDR 5 million to 20 million per square meter.

What are The Challenges of Buying A House in Indonesia As A Foreigner?

Buying property as a foreigner in Indonesia has its complexities:

• Regulatory Restrictions: Foreign ownership is limited to certain property types under specific conditions, as outlined by Indonesian property law.
• Price Minimums: Foreigners must adhere to price thresholds (e.g., IDR 10 billion for Jakarta houses), which can be prohibitive.
• The Right to Use Dilemma: Developers and banks often hesitate to work with Hak Pakai (Right to Use) properties, favoring alternatives like Hak Guna Bangunan (Right to Build).
• Immigration Requirements: A valid residence permit is necessary for property purchases.

Understanding these challenges can help potential investors navigate the real estate landscape more effectively.

Common Knowledge to Buy a House in Indonesia As A Foreigner

The government needs to fix at least five things to loosen the faucet of foreign ownership restrictions in Indonesia, which will stimulate the domestic property sector. Therefore, these five things become common knowledge for foreigners to familiarize themselves with.

1. The Right of Use Property

Banks are often reluctant to accept properties with the status of Right to Use as collateral for loans. This has created a wave effect in which people are not focusing on any Right to Use properties, and developers still need to focus on developing such properties.

2. Credit Facilities

Regulations allowing foreigners to get credit facilities to buy a house in Indonesia still need to be made. Since the government’s price limit is still high, the foreigners being targeted are in the upper segment.

3. Complex Process for Foreigners to Get a Residence Permit

The process for foreigners to obtain a residence permit in Indonesia is still quite complex and needs to be simplified. This includes both temporary and permanent residence permits. The government regulation only opens up opportunities for foreigners with a license to buy a house, whose existence within the country provides benefits such as business.

4. No Homeownership Opportunities

Developers still hope the government will open homeownership Indonesia opportunities for foreigners not domiciled in Indonesia to expand the market. Even so, developers hope to increase foreign markets after opening the ASEAN Economic Community era.

5. The Right to Use Dilemma

The Right to Use dilemma in the domestic property market must be fixed. The foreign market is still relatively new, so developers are hesitant to build properties with the Right to Use, especially for apartments. This is because the local market prefers properties with the Right to Build status over the Right to Use.

READ MORE:

• 10 Strategic Locations for Buying Property in Bali
• How Can Foreigners Buy Apartments in Indonesia?
• Tips for Selecting A Reliable Property Agent in Bali

Buy A House in Indonesia: Terms and Conditions for Foreigners

You’ve been living and doing business in Indonesia for quite some time and now dreaming of owning property in Indonesia? Here’s a handy list of terms and conditions you need to know to make your property ownership dreams come true.

1. The “Right to Use” Requirement

First, as a foreigner, you can only purchase landed houses with the coveted “Right to Use” status. This means that the property is on state-owned land or has ownership rights. So, ensure you’re eyeing the correct property type before diving into the Indonesian real estate market.

2. Price Limits Across Regions

Indonesia is diverse, and property prices vary depending on the region. The government has set price limits for different areas to keep things fair. For example, in Jakarta, the minimum price for landed houses is IDR 10 billion, while for flats or apartments, it’s IDR 5 billion. 

For other regions, these limits can range from IDR 1 billion to IDR 5 billion for landed houses and IDR 750 million to IDR 2 billion for apartments. Keep these numbers in mind while hunting for your dream property.

3. Immigration Papers and Residence Permits

Before you can call that Indonesian property your own, you’ll need more than just a suitcase of cash. You must possess official immigration papers, including a residence permit. This paperwork proves that you’re not just a tourist passing through; you’re here to invest in Indonesia’s real estate market.

4. Omnibus Law and Spatial Plans

Thanks to the Omnibus Law, local governments in Indonesia are now required to upload spatial plans to the OSS System. What does this mean for you? It streamlines checking if your potential property complies with specified land use regulations. It’s like having a GPS for navigating the bureaucratic maze of property ownership.

Here is a list of essential terms and conditions for foreigners seeking property in Indonesia. With this information, you’ll be better prepared to embark on your Indonesian property ownership journey. Happy house hunting!

Types of Property that Foreigners Can Own in Indonesia

In Indonesia, foreigners can own various types of property through different arrangements. Here’s a breakdown:

Leasehold Property

Foreigners can acquire property through long-term leases, which give them the right to use and develop the land or structure for an extended period.

Condominiums

Foreigners can own condominiums under the “Hak Pakai” (Right to Use) title, granting them unit ownership for a specified duration.

Hak Guna Bangunan (HGB)

This is a right to build and use the land for a specific period, usually up to 30 years, which can be extended for 20 years or even longer.

Hak Pakai (Right to Use)

This right allows foreigners to use and exploit state-owned land, often for commercial or industrial purposes.

Investment Property through a Local Entity

Foreigners can establish a locally registered company to purchase and own property for business purposes, subject to specific regulations.

Understanding these property ownership options helps foreigners navigate the Indonesian real estate landscape in compliance with local regulations.

6 Ways to Obtain Property As Foreigners in Indonesia

Foreign nationals (WNA) have several options for acquiring real estate in Indonesia. Here they are:

• Invest through a PT PMA: Foreigners can invest by setting up a foreign-owned company that meets BKPM requirements.
• Purchase Leasehold Property: Buy property with extended usage rights, avoiding full ownership.
• Acquire Property under Hak Pakai (the right to use) Title: Own property through a legal right for residential use.
• Obtain Property under Hak Guna Bangunan Title: Get the right to build and use land for a specified period.
• Make a Purchase Using a Passport: Some properties allow direct purchase using a passport.
• Buy through an Indonesian Nominee: Utilize a local nominee for simplified ownership.

These options offer foreign nationals diverse ways to engage in Indonesia’s real estate market.

How Do Foreigners Purchase a Property in Indonesia?

Purchasing or leasing property in Indonesia can be intricate for foreigners unfamiliar with local rules. Simplify the process with these steps:

Establish a PT PMA

Create a PT PMA to enable property transactions that meet Indonesia Investment Coordinating Board (BKPM) requirements. Using a local agency can streamline this process.

Engage a Professional Real Estate Agent

Working with a skilled real estate agent can save time and allow you to access more properties. They also assist in negotiations, ensuring your interests are protected.

Search for a Property

When looking for property, consider location, size, materials, and style. Our platform can help you find the right match based on your preferences.

Check Property Licenses

Request the seller’s Certificate of Property and Building Approval (PBG) before negotiating. Lack of these documents may signal issues in buying a house in Indonesia as foreigners.

Conduct Due Diligence

Verify land ownership, licenses, and contracts to avoid legal problems and ensure a worthwhile investment.

Down Payment and Sales Purchase Agreement

Sign the SPA in the presence of a public notary, making a down payment of 10-30%. Ensure the SPA protects your interests.

Finalize the Transaction

Transfer ownership in the presence of a notary and pay the Transfer Tax (BPHTB) on time. Be cautious of unofficial price suggestions to minimize taxes.

Ownership Transfer

After completing payment and tax obligations, the notary transfers ownership and is registered at the National Land Agency (BPN). The buyer receives a Property Certificate, solidifying legal ownership.

How Does Property Tax Work for Foreigners in Indonesia?

Since its economic reform, Indonesia has become a sought-after destination for many foreign business owners and investors who want to purchase property. Foreigners can benefit from one of the lowest property taxes in Southeast Asia.

The land and building tax, a state tax that is the most fundamental property tax in the country, is levied at 0.5% and serves as a regional income for local and central governments for their facilities.

Both parties must pay certain taxes when transferring land and building rights in Indonesia. The sellers pay an income tax on the sale of land or property, and the buyers pay an acquisition tax. The seller tax is as follows:

• 1% for simple flats or simple houses for their transfer of land or building rights
• 2.5% for regular buildings except for simple houses or simple apartments for their transfer of land or building rights
• 0% for government buildings and government’s special-assignment buildings for their transfer of land or building rights

The transaction value determines the buyer’s tax, which is 5%. However, specific individuals, like diplomatic consulates or representatives of NGO agencies, can avoid these taxes.

Other taxes related to the property are lease taxes applicable to tax and non-tax residents and construction tax, which applies when the building is built.

Taxation in Indonesia can be complicated and tricky. InCorp can assist with a tax consultation to avoid administrative risk.

Leasing Property as an Alternative to Buy A House in Indonesia

There are six main items we have pointed out to check before renting a property. They are:

Quotation and Payment

Renters must pay rent in Indonesian Rupiah. Some quotations still have US Dollars as their main nominals. However, foreigners must plan before losing out on currency exchanges.

Duration of Lease

The usual lease term is 20-30 years, depending on the agreement. Ensure the lease can be extended if necessary and agree on payment terms beforehand.

Leasing Contract

Find out what items are covered in the leasing contract. The renter usually covers maintenance costs, air conditioning cleaning, water pump repair, and other utilities. 

Discuss an agreement where more significant expenses need to be paid by the rentee. An agreement on whether monthly fees like electricity, water, internet, and phone bills are included in the payments should be made.

READ MORE:

• A Guide to Property Tax in Indonesia
• The Ultimate Handbook for Managing a Rental Property in Bali
• The Growing Potential of Property Investment in Surabaya

Security Deposit

A security deposit is standard and is usually priced at one month’s rent after signing the lease. Ensure the security deposit is 100% refundable and that no fine print is included in the agreement.

Renewal Right

The renter should make the option to renew the lease available and prioritized. During renewal, the price will usually increase. Ensure that you know the current land pricing to avoid getting duped.

Sublet Right

Some homeowners allow tenants to sublet the area to other renters. Renters or foreigners must discuss this with the landlord before signing the agreement.

Can Ownership of Land for Foreigners be Acquired through Marriage?

According to the Indonesian Marriage Law of 1974, an Indonesian citizen marrying a foreigner may lose Hak Milik rights. However, the couple can sign a prenuptial, postnuptial, or post-marital agreement to maintain property rights.

While not covered by the Marriage Law, these agreements allow the Indonesian spouse to legally own property, enabling the foreign spouse to purchase and own it through the Indonesian spouse acting as a property nominee.

Obtain Your Dream Property with InCorp Indonesia

In conclusion, owning property in Indonesia as a foreigner can be complex, involving various regulations and requirements. To streamline this journey and minimize the associated hassle, consider enlisting the land and property ownership service of InCorp Indonesia. 

Our experts possess the knowledge required to navigate these regulations, and we offer a comprehensive company registration service. We facilitate a seamless process to help you achieve your dream of owning property in Indonesia.