Indonesia is a stunning and diversified nation that has always been one of the most well-liked travel destinations in Southeast Asia. The nation’s real estate industry offers everything from beachfront houses to city apartments and attracts a lot of expats and foreign investors.
It is a great place to reside due to its breathtaking natural scenery, rich cultural legacy, and friendly folks. Many people dream of having real estate in Indonesia’s tropical regions.
However, it might be challenging for foreigners to purchase a home, property, or villa property in Indonesia. Many foreigners might find it difficult to understand the complex Indonesian regulations governing the property ownership processes.
Hence, if you’re someone who’s thinking about “how to buy or sell my property in Indonesia”, then this article is for you. In this post, we will discuss Indonesia’s regulatory requirements, tax obligations, and the choices available to foreigners who want to purchase land there.
How Can Foreigners Buy Property in Indonesia?
Indonesia allows foreigners to make property investment in Jakarta or any place in Indonesia, but the process is a bit difficult. It’s crucial to be aware that only people with Indonesian passports can receive the Hak Milik (HM) privilege. This entitles them to complete ownership of land or other property. Hak Milik, which translates to “right to own” in English, refers to real estate or building structures.
The Indonesian government aims to shield the housing sector from large-scale foreign investment so that its citizens can benefit from the expanding economy. Having an Indonesian passport makes it possible to completely own land or other property.
Still, there are a few property investment opportunities in Indonesia available for foreigners. Here are a few ways through which foreigners can own and purchase real estate in Indonesia:
- Indonesian nominee.
- Leasehold.
- Freehold PT PMA.
Indonesian Nominee
Through Hak Milik, foreigners cannot own property, but Indonesian citizens can. It is possible to purchase or sell property in Indonesia in the ownership of an Indonesian national. And then establish a contract stating that the foreign buyer is the true owner.
However, in accordance with Indonesian law, the building or land will always be legally owned by the Indonesian nominee. So, to invest in Indonesian real estate, many foreigners utilize an Indonesian nominee. But using a nominee might have legal repercussions and is quite complicated.
Hence, one might say that using an Indonesian nominee is a technique to get around the ban on foreign ownership for buying property in Bali or any part of Indonesia. However, if the Indonesian government finds out, they may take possession of the property and return it to the state.
Leasehold
The simplest option for foreigners to use the property for an extended period of time is through a leasehold agreement. It is known as Hak Sewa in Indonesia. It’s crucial to understand that it is for long-term or short-term property rentals in Indonesia rather than complete ownership.
Many foreigners utilize PT PMAs to leasehold land and construct their own homes using Hak Guna Bangunan. A leasehold agreement typically has a 30-year term that can be followed by 20- and 30-year extensions.
Hak Guna Bangunan is also good for 30 years and has two extension options of 20 and 30 years. It is often wise to purchase a property under leasehold rather than freehold because the former option is less expensive.
Freehold PT PMA
Foreigners can also acquire property ownership through freehold with a PT PMA, or Perseroan Terbatas Penanaman Modal Asing. In order to buy property in Indonesia, foreign investors can create a PT PMA, a foreign-owned corporation.
Most foreigners decide to use a PT PMA to purchase real estate in Indonesia as this option is the closest to ownership. An Indonesian PT PMA can be established in about ten weeks for IDR 15 million ($975) to IDR 35 million ($2,275). A PT PMA can be made with the help of real estate brokers and notaries.
Step-By-Step Guide For Foreigners To Own Property In Indonesia
It can be challenging to purchase Bali property ownership or any part of Indonesia, particularly for foreigners who are not familiar with the local laws and practices. Hence, you may go through the following simple steps to make informed choices regarding your real estate investment.
1. Build a PT PMA: This process is a bit tedious and complex as it involves various necessities of the Indonesia Investment Coordinating Board (BKPM). Hence, you may use any local real estate property management service to streamline the process.
2. Look for properties: You may take the help of any property management services in Indonesia to help you search for the best properties. Keep in mind various factors such as size, style, budget, location, etc.
3. Check the licenses: It is essential to request the seller’s Certificate of the Property and the Building Approval (PBG) before starting a price negotiation or moving forward with the acquisition. If the seller or owner is unable to provide those documents, there might be a problem.
4. Perform due diligence: To avoid legal issues and guarantee your purchase is worthwhile, you must perform due diligence. This includes checking licenses, confirming land ownership, and going over the contract.
5. Make a down payment and sign the sales and purchase agreement: The obligations of the buyer and seller in a real estate transaction are outlined in the Sales Purchase Agreement (SPA). It needs to be signed and signing the SPA necessitates a down payment.
6. Perform the final transaction and transfer the ownership: The final step in buying a property is the handing over of ownership. This will be done from the seller of the property to the buyer in front of a public notary. The buyer will receive ownership from the public notary once all payments and taxes have been made. The buyer will obtain a Certificate of the Property which includes all the necessary information on the property. And this transfer will then be registered at the National Land Agency (BPN).
Closing Lines
Evidently, investing in properties in Indonesia is popular among foreigners. But it is also evident that buying or renting properties for foreigners in Indonesia is an uphill battle. Hence, it is always wise to take the help of local property management services in Indonesia such as MMW Property. They will simplify the hassle of property investment in Indonesia.
Read more: A Guide To Successful Airbnb Property Management 2023
