Buying Property In Indonesia
Are you thinking of buying property in Indonesia? Oh…. Wonderful Indonesia a rich land of extreme diversity is full of just about anything you could be looking for except for maybe polar bears? So, about…. Indonesia, a Southeast Asian nation made up of thousands of volcanic islands, is home to hundreds of ethnic groups speaking many different languages. It’s known for beaches, volcanoes, Komodo dragons and jungles sheltering elephants, orangutans and tigers. On the island of Java lies Indonesia’s vibrant, sprawling capital, Jakarta, and the city of Yogyakarta, known for gamelan music and traditional puppetry.
Other than its stunning beaches, beautiful people and interesting culture, Indonesia boasts of being the largest economy in the Southeast Asian region.
That said, more and more foreigners from across the world come to the enclave and decide to settle here, sometimes marrying a native or establishing business in the local market.
Indonesia has a rather complex and strict regime of laws regulating foreign investment in property and land. It is essential for any buyer to be familiar with general legal principles and the acquisition options that are available to foreigners.
A Few things to consider when it comes to buying property in Indonesia
Indonesia Adat /Traditional land rights
One of the first things you need to consider is whether the land you want to purchase has an adat title or a certified title. If the property you are interested in is titled under adat or traditional laws, it is not advisable to buy the property. Lands with adat ownership titles are usually inherited through the Indonesian or tribal bloodline.
Adat is essentially a communal approach to regulating land rights, including land rights exercised by individuals with the consent of the community, and adat varies widely across the archipelago, sometimes even over short distances.
Basic Agrarian Law of 1960
Certified land ownership transactions are governed under the Basic Agrarian Law No. 5 Year 1960 through the National Land Agency (BPN) . Under this law, foreigners are only allowed the following property rights:
Sertifikat Hak Guna Bangunan (SHGB) – Right to Build
The SHGB is a document that establishes the right of the certificate holder to build structures on the land for up to 30 years. At the end of the term, it can be renewed for another 20 years. The SHGB should only actually be owned by Indonesian citizens and legal entities recognized by Indonesian law. If you are a foreigner and are looking to establish a company in the country, the SHGB could be an option for you. Just make sure your company is registered legally in the archipelago.
Sertifikat Hak Guna Usaha – Cultivation Right on Land
This certificate is similar to SHGB only that the land should be used for agricultural purposes. This document’s validity is up to 25 years and may be extended to 35 years.
Sertifikat Hak Pakai (SHP) – Right to Use
The SHP is similar to SHGB, except that this certificate will have a maximum validity period of 25 years and can be renewed until 80 years of use. This is usually the route taken by foreign embassies or foreign companies that are not yet registered under Indonesian law. A property with an expired Hak Pakai status or one that is sold to another owner regains its Hak Milik (freehold ownership) status.
Some foreigners would get a hold of apartments or condominiums by signing a lease agreement with the developer. Even when the sale is done, the title would still be under the name of the developer or property management firm. Leasehold rights are normally granted to tenants of both residential and commercial premises. Foreign residents in Indonesia as well as foreign corporate representative offices are entitled to lease property. … An apartment can only be purchased by a foreigner on land with right of use (Hak Pakai).
Some suggest that the safest lease certificate to get is the SHP. An SHP or Hak Pakai will bear your name on the certificate and not just that of a local representative.
Some of you will marry Indonesian nationals. If you are engaged to a local, it is recommended to draw up a prenuptial agreement (prenup) to establish the separation of your respective assets. In effect, your Indonesian spouse will still have all their property ownership rights even if you (a foreigner) cannot legally have these rights.
If you have already married an Indonesian without a prenuptial agreement, you may want to consider getting a post-nuptial agreement (postnup). This document is not the same as drawing up a back-dated prenup, which is illegal. A postnup can also be used to execute the separation of your individual assets but is only effective on a date after marriage.
In the case of mixed nationality marriages without either a prenup or postnup, the property that the Indonesian spouse owns (with Hak Milik certification) becomes the couple’s conjugal property. But since it is illegal for a foreigner to have a Hak Milik property, the couple may have to sell the property within a year after your marriage or convert the title under the Indonesian spouse’s name with hak pakai status.
Unfortunately, converting the title to Hak Pakai is not the same as owning the property. Therefore, the best route to take is getting a division of assets between you and your spouse, one way or another, to ensure your partner’s right to own.
In the case of your spouse passing away, the Indonesian government has the right to take your conjugal property if you do not have a legal prenup or postnup document
Regulation No. 13 of 2016 of the BPN has expanded the rights of foreigners to own homes in Indonesia. The regulation states that you may purchase homes in the country provided that the property reaches a certain minimum price level. For instance, you may only purchase houses or apartments that are Rp.10 billion or above in Jakarta. Other districts will have various price pegs. It’s important to note that you will in effect own the structure that sites on the land, but not the actual land itself.
Aside from price levels, there are other requirements for purchasing a house or apartment in the country. The foreigner and his or her family must have residency status. Secondly, the property should be purchased from the government or a developer.
For more information on this topic, see this great article here seen in the indonesiaexpat.biz HERE
If you have any questions on this topic, please feel free to let us know and we will make sure you receive all the answers you need.