Can a Foreigner Buy A Property in Indonesia Under Their Local Spouse’s Name?

Mixed marriages are increasingly common in Indonesia, primarily due to the country’s status as an international hub for business and tourism. Many foreigners meet their partners while working or vacationing in Indonesia and decide to settle down. However, a crucial aspect to consider when buying property in Indonesia involves property ownership rights, known as Hak Milik.

Understanding these ownership rights is essential in the context of mixed marriages. In this article, we will explore the complexities of property ownership in mixed marriages and the importance of prenups or postnuptial agreements in Indonesia, ensuring that couples are well-informed when buying property together.

Can Foreigners Buy Property in Indonesia?

Foreigners in Indonesia can buy property, such as houses or apartments, through leasehold agreements. These agreements allow them to lease the land for a fixed period, typically 30 years, with an extended option for another 30 years.

However, due to legal restrictions, foreigners are not permitted to obtain full ownership of the land, known as Hak Milik (Freehold). These limitations are in place to protect Indonesian land from foreign ownership and ensure that land is preserved for the benefit of the local population.

While foreigners cannot hold Hak Milik, Hak Sewa (Leasehold) agreements provide them with land-use rights, allowing them to use, build on, and develop the property for the duration of the lease.

Regulation for Foreign Property Investment in Indonesia

Recent guidelines under Circular Letter IMI-0820.GR.01.01 of 2022 clarify how foreign citizens can purchase property, making it easier for investors. Here are the Indonesia’s new property laws:

• Strict Regulations: Foreigners face tight rules regarding owning land in Indonesia.
• New Guidelines: The Circular Letter IMI-0820.GR.01.01 of 2022 provides clearer instructions for foreign buyers.
• No Direct Ownership: Generally, foreign individuals and entities cannot directly own land.
• Exceptions to Rules:
  • Foreigners who are Indonesian citizens.
  • Representatives of foreign governments or international organizations.
  • Foreigners married to Indonesian citizens.
• Leasehold Agreements: Foreigners can lease land for:
  • Residential purposes.
  • Business purposes.
• Lease Terms:
  • Initial lease: Up to 25 years.
  • Renewal: Can extend for another 25 years.
• Protecting National Interests: These regulations prioritize land ownership for Indonesian citizens.

Restrictions for Foreign Property Investment

In Indonesia, foreign property ownership is governed by specific rules and regulations. Here are the key points for buying properties in Indonesia for foreigners:

• Leasehold Agreements: Foreigners can only acquire property through leasehold agreements, allowing them to lease land for typically 30 years, with an extended option of 30 years.
• No Freehold Ownership: Foreigners are prohibited from owning freehold property in Indonesia.
• Limit on Land Size: Foreigners can only own one plot of land, with a maximum size limit of 2,000 m².
• Minimum Property Value: The property must meet a minimum value requirement, which varies by region. For example, in Jakarta, the minimum value for a landed house is IDR 5 billion (approximately USD 325,000).

Types of Properties Foreigners Can Own in Indonesia

Foreigners can own specific types of property in Indonesia, but there are regulations to keep in mind. Here are the types of property that foreigners can own:

• Condominium Ownership: Foreigners can own condominium units within a building, provided they do not exceed 49% of the total units in that building.
• Landed Houses and Villas: Foreigners may own landed houses or villas within designated complexes or projects. However, they must have a valid lease agreement for a minimum of 25 years, possibly extending it for 25 years.

The Benefits of Buying Properties in Indonesia

Investing in property across Indonesia offers a unique combination of cultural diversity and economic opportunity, making it an appealing choice for investors.

Significant Tax Revenue Contribution

The Indonesian government’s initiative to attract foreign investment in the property market is vital to the country’s economic development.

Foreign purchases are anticipated to generate approximately IDR 24 trillion in tax revenue, based on an estimated sale of over 10,000 property units annually. This highlights the sector’s crucial role in enhancing the nation’s financial stability.

Tax Breakdown:

• Value Added Tax (VAT): 11%
• PPH (Seller’s Tax): 5%
• BPHTB (Land and Building Acquisition Tax): 5%
• Sales Tax on Luxury Goods (for Premium Properties): 20%

Strategic Pricing and Tax Policies

The government has established a minimum property price of USD 500,000 for foreign investors, ensuring substantial contributions to national revenue. The comprehensive tax structure, totaling 40%, underscores the value and potential that Indonesian real estate offers investors.

Indonesia’s diverse landscape presents a plethora of opportunities for real estate investment. However, areas like Bali stand out for their remarkable cultural allure and economic potential. Bali exemplifies this investment opportunity, seamlessly integrating its rich heritage with a favorable environment for investors.

What Happens When Foreigners Buy Property in Indonesia under Their Local Spouse’s Name

Under the Marriage Law in Indonesia, when an Indonesian citizen is married to a foreigner in Indonesia or outside Indonesia, the Indonesian citizen in the mixed marriage may lose the freehold title (Hak Milik) of his/her land ownership.

This is because the foreign spouse doesn’t have the right to hold the freehold title, and assets, including Hak Milik, are considered joint property of the foreigner and the Indonesian national, according to the agrarian regulations.

Thus, the Indonesian spouse must release the land by granting or selling it within 12 months of acquiring it. If the land is not released within the specified period, the owner’s land rights will be removed automatically, and it will then belong to the state.

READ MORE:

• 7 Steps to Property Ownership in Bali for Foreign Investors
• Doing Business on a Spouse Visa in Indonesia

The Important Role of Prenuptial and Postnuptial Agreements

When a foreigner and an Indonesian national marry, they often must ensure they have drafted a prenuptial agreement before marriage.

As discussed earlier, Indonesian law sees mixed couples as having the same rights to their assets, including property. Therefore, if foreigners do not set up a prenup with their Indonesian spouses to indicate the division of assets, their local spouses are not permitted to own any property under their names.

Another agreement, a postnuptial or post-marital agreement, functions similarly to a prenup. Although the Indonesian Marriage Law does not cover the postnuptial agreement, it has legal effect because it is stated under the Indonesian Civil Code.

Mixed couples who don’t have a prenup will often opt for a postnuptial agreement when they realize that they need a long-term financial plan and consider buying a property in Indonesia under the name of the local spouse.

For both types of agreements, either prenups or post-nuptials, do keep in mind that you need to take into account the possible change of circumstances such as disability and childbirth.

You must also review your prenup or postnup with a professional legal consultant every other year to ensure they are up-to-date with laws and circumstances.

Start Buying Property Indonesia with InCorp

A prenuptial or postnuptial agreement offers essential protection and clarity regarding asset distribution when buying property in Indonesia.

If you do not have a prenuptial or postnuptial agreement, Indonesian law will decide how to divide the property you purchased during the marriage.

InCorp can help you draft a valid prenuptial and/or postnuptial agreement that meets the law and requirements for buying property in Indonesia and help you understand your rights and obligations with the following:

• Land and Property Ownership
• Prenuptial and Postnuptial Agreement Drafting
• Legal Consultation

Fill out the form below to purchase your dream property in Indonesia. We will protect your rights and ensure your interests are safeguarded in any future circumstances.