Indonesia was a Dutch colony for 350 years, only gaining independence in 1945. Since then, Indonesians have been determined to hold onto their land.

Freehold land title - or 'hak milik' - is not available to foreigners in Indonesia. 

“Generally, foreign individuals or foreign companies that are not registered under current Indonesian laws enjoy only the right of use (hak pakai),” says Jones Lang LaSalle’s Indonesia Property Investment Guide. 

"Individual foreigners are allowed to own residential property," continues the Guide. "Foreigners who provide benefits to the national development, reside permanently or temporarily in Indonesia, and have immigration documents or visa, may purchase:

- nonsubsidised houses on land with right of use title,

- strata-titled apartment units on land with right of use title, and

- vacant land with right of use title or other land use agreements with the land title holder, and build a house on the land."

The look at these methods in more detail below.

Condominiums

Though foreigners are not permitted to own condominiums in Indonesia, they are permitted to hold land-use title, or 'hak pakai' title. The developer holds the right to build 'hak pakai' deed. The initial 'hak pakai' deed is for 25 years, and can be renewed for another 25 years, and then a final 20 years, making a total 70-year lease.

Foreigners are also able to enter into a convertible lease agreement with the developer, whereby the title is held in the name of the developer or an Indonesian nominee, and the lease is held for a defined period. The lease agreement states that when the laws are changed to permit foreign ownership of strata titles, then both the lessee and the lessor will be obligated to transfer the title to the foreign owner. 

Landed property

Though not permitted to own land in Indonesia, foreigners can acquire the rights to use land. Foreign buyers have three options.

Representatives

Foreigners can have an Indonesian representative who buys the land, and the foreigner enters into three agreements: 

- a loan agreement saying the foreign buyer lent the representative the money to buy the property

- the representative gives the foreign buyer power of attorney, meaning the foreigner can sell, lease or mortgage the property

- and finally, a permanent right of use agreement, whereby the foreign buyer has full rights to use and occupy the land.

Establishing a company

Foreigners can also form a Penanaman Model Asing Company, which is a 'status of doing business' in Indonesia. To set up a PMA, foreigners must submit a business plan, operate a business that adds value to Indonesia in terms of skills, employment, and the environment, make a cash deposit to an Indonesian bank, and show that the property investment is an asset of the company.

PMAs can not be established for the sole purpose of owning a landed property, and can only hold land under 'hak guna bangunan' title - or conditional corporate ownership title.

Establishing a PMA can take three or four months, and costs around A$7,000. PMAs can operate for 30 years once established, and a 30-year extension can be granted. PMAs can be 100% controlled by foreigners.

Leasehold titles

The third and final way foreigners can acquire property in Indonesia, is through leasehold title. These can be granted to foreigners who live in Indonesia, and have a KITAS working visa. Leasehold titles run for 25 years, and can be renewed for another 25 years.

Titles

The Basic Agrarian Law of 1960 governs the certification of land in Indonesia. Land certification is registered at local land offices. Unregistered land, 'adat land', is owned by the community, and titles should be carefully examined.

Obtain specialist advice

It is generally recommended that property transactions in Indonesia are conducted with the help a lawyer or notary, rather than a real estate agent. This article is intended as a guide only.
 

Read more:

• Indonesian real estate glossary
   
• Obtaining finance in Indonesia
   
• Indonesia's property taxes