Ownership and Property Laws

 

Ownership in Indonesia, Property laws and Regulations


The freehold property option for foreigners

The most used (and unfortunately for the unwary, misused) option is to use an Indonesian name holder for your property,

with who you make contracts. These contracts give you the right to use the property. See for more information below.

We cannot stress enough that these contracts should be checked and double checked. No matter how friendly the people

are that offer their help, ask advice from a well know legal company or notaris in Bali.


Right of Ownership

Is the most comprehensive and complete form of individual rights over land. There is no time limit, and the holder has the

right to use the land, including the earth underneath and the water and air above. It does not, however, include the right

to obtain wealth from resources underneath the earth. Right of Ownership may be had only by Indonesian citizens.


Right of Use

Is a right over land, either State-owned or private, which gives the holder the right to use and obtain the product of a

certain piece of land. The land to which Right of Use is applied may be used as a building site or for agricultural purposes.

PP 40/1997 states that the initial period for Right of Use is not to exceed 25 years but can be extended for another twenty

years or even indefinitely if the land is still in use for a certain reason. Right of Use may be owned by Indonesian citizens,

resident foreigners, Indonesian companies domiciled in Indonesia, and foreign companies that have a representative office

in Indonesia. Currently it is easy for foreigners in Bali to obtain the right of use.


Right of Building Lease

Is a right to lease land, either State-owned or private, which gives the holder the right to use the land in return for compensation.

The payment could be one-time or periodical as determined by mutual understanding between the parties. Right of Building Lease

may be owned by Indonesian citizens, resident foreigners, Indonesian companies domiciled in Indonesia, and foreign companies

that have a representative office in Indonesia.


What to do if a foreigner wants to use an Indonesian nameholder?

It is best to use a well-known company to arrange your contracts, and it is not unusual to ask a second opinion about the contracts.

Important issues are in heritage and marriage. A foreigner married to an Indonesian woman, needs for example to have a marriage

contract.


Choose the right Indonesian Partner

To "own" your property or land. This may take some time and asking around. Talk with foreigners in your area, and don't haste.

Properties can also be owned by companies, like a PT or a PMA. A PT is an Indonesian "Limited" and a PMA is a foreign investment

company which can be owned 100% by foreigners. The PMA property license has to be renewed every 20 or 30 years. Setting up

a PT will cost about 7 to 10 million IDR and a PMA will cost around 35 million IDR.


Hak Pakai for foreign investors

The government offers foreign investors land rights that are relevant to the nature of their business. Prospective buyers of land for

any purpose should consult the local government authorities on land use, planning and zoning. Based on a Presidential Decree issued

in June 1996, foreigners domiciled in Indonesia are allowed to own one residential property. To meet the regulations of ownership of

a house or an apartment, a foreigner must be deemed to be "beneficial to national development" and must be either:


1. An Indonesian resident (domiciled permanently in Indonesia) in possession of a Permanent Resident Permit

2. A non-resident (domiciled in Indonesia only at particular times) in possession of appropriate visit and immigration stamps in his/her

passport. A foreigner can purchase or construct a house built only on land with the right of use (Hak Pakai), the right of use with the

right of proprietorship, or the right of lease (Hak Sewa). An apartment can only be purchased by a foreigner on land with right of use

(Hak Pakai). Foreigners are not, however allowed to purchase houses or apartments classified as "low cost housing" or "very low-cost

housing".


Ownership is limited to 25 years

And can be extended for another 25 years provided that the foreigner remains an Indonesian resident or meets the status requirements.

If the foreigner departs from Indonesia, the property must be sold or transferred within one year after departure. If the foreigner or his

family does not use the house for more than 12 consecutive years, then the foreigner forfeits the "being domiciled" status, for the purpose

of owning residential property.