How Can Foreigners Buy A House in Indonesia?

Indonesia is an attractive destination for foreigners seeking to invest in property. Possessing stunning landscapes and vibrant culture makes Indonesia’s popularity more significant than ever. However, are you ever curious how easy it is to buy a house in Indonesia? 

Acquiring a house or making a real estate investment in Indonesia in a tropical paradise has challenges and regulations. This article will explore the obstacles foreigners face when purchasing property in Indonesia and the essential requirements and considerations for successful property ownership.

Can Foreigners Buy A House in Indonesia?

While it’s more challenging in Indonesia than many expect, foreigners are allowed to purchase property. However, full ownership, known as Hak Milik (HM), is exclusive to Indonesian passport holders, reflecting the government’s aim to safeguard the housing market from excessive foreign influence. Nonetheless, there are alternative ways for foreigners to acquire and possess property in Indonesia.

Foreigners can buy property in Indonesia, though specific restrictions and criteria must be fulfilled. A crucial requirement is that the property must be under a leasehold arrangement, signifying a long-term lease rather than outright ownership.

What are the Advantages of Buying Properties in Indonesia As A Foreigner?

Embarking on property ownership in Indonesia as a foreigner unveils a spectrum of advantages. From enticing investment potential to flexible leasehold options, here’s a concise breakdown:

• Lucrative Investment Potential: Indonesia’s thriving economy presents opportunities for property value appreciation.
• Tourism and Retirement Appeal: Ideal for retirement or vacation homes, offering diverse attractions and landscapes.
• Leasehold Flexibility: Long-term lease options provide secure land use without full ownership complexities.
• Convenient Condominium Ownership: Straightforward ownership under the “Hak Pakai” title for clear legal frameworks.
• Business Expansion Opportunities: Establishing a local entity facilitates property ownership for business expansion.
• Participation in Economic Growth: Contribute to and benefit from Indonesia’s economic growth through real estate.
• Rental Income Potential: Rent a property, especially in popular tourist destinations.

What are The Challenges of Buying A House in Indonesia As A Foreigner?

Developers believe that the price limit for foreign housing to buy a house in Indonesia will not significantly impact the property market if the government does not make some other regulatory breakthroughs.

Deputy General Chairman of Real Estate Indonesia (REI) for Law and Legislation, Igneszj Kemalawarta, said that developers welcome the issuance of Regulation of the Minister of Agrarian Affairs and Spatial Planning or Head of the National Land Agency No. 13 of 2016.

The law regulates the issue of price limits for residential properties that foreigners can buy. The regulation stipulates that foreigners can only buy Jakarta property for a minimum price of IDR 10 billion for landed houses and IDR 5 billion for flats or apartments.

For other regions, the price limit ranges from IDR 1 billion to IDR 5 billion for landed houses and IDR 750 million to IDR 2 billion for apartments. However, the regulation will not increase the foreign national property market because of other obstacles.

Common Knowledge to Buy a House in Indonesia As A Foreigner

The government needs to fix at least five things to loosen the faucet of foreign ownership restrictions in Indonesia, which will stimulate the domestic property sector. Therefore, these five things become common knowledge for foreigners to familiarize themselves.

1. The Right of Use Property

Banks are often reluctant to accept properties with the status of Right to Use as collateral for loans. This has created a wave effect in which people are not focusing on any Right to Use properties, and developers still need to focus on developing such properties.

2. Credit Facilities

The regulation allowing foreigners to get credit facilities to buy a house in Indonesia has still not been made. Since the price limit set by the government is still high, foreigners being targeted are in the upper segment.

3. Complex Process for Foreigners to Get a Residence Permit

The process for foreigners to obtain a residence permit in Indonesia is still quite complex and needs to be simplified. This includes both temporary and permanent residence permits. The government regulation only opens up opportunities for foreigners with a permit to buy a house, whose existence within the country provides benefits such as business.

4. No Homeownership Opportunities

Developers still hope the government will open homeownership Indonesia opportunities for foreigners not domiciled in Indonesia to expand the market. Even so, developers hope to increase foreign markets after opening the ASEAN Economic Community era.

5. The Right to Use Dilemma

The Right to Use dilemma in the domestic property market must be fixed. The foreign market is still relatively new, so developers are hesitant to build properties with the Right to Use, especially for apartments. This is because the local market prefers properties with the Right to Build status over the Right to Use.

READ MORE:

• 10 Strategic Locations for Buying Property in Bali
• How Can Foreigners Buy Apartments in Indonesia?
• Tips for Selecting A Reliable Property Agent in Bali

Buy A House in Indonesia: Terms and Conditions for Foreigners

You’ve been living and doing business in Indonesia for quite some time and now dreaming of owning property in Indonesia? Here’s a handy list of terms and conditions you need to know to make your property ownership dreams come true.

1. The “Right to Use” Requirement

First, as a foreigner, you can only purchase landed houses with the coveted “Right to Use” status. This means that the property is on state-owned land or with ownership rights. So, ensure you’re eyeing the correct property type before diving into the Indonesian real estate market.

2. Price Limits Across Regions

Indonesia is diverse, and property prices vary depending on the region. The government has set price limits for different areas to keep things fair. For example, in Jakarta, the minimum price for landed houses is IDR 10 billion, while for flats or apartments, it’s IDR 5 billion. 

For other regions, these limits can range from IDR 1 billion to IDR 5 billion for landed houses and IDR 750 million to IDR 2 billion for apartments. Keep these numbers in mind while hunting for your dream property.

3. Immigration Papers and Residence Permits

Before you can call that Indonesian property your own, you’ll need more than just a suitcase of cash. You must possess official immigration papers, including a residence permit. This paperwork proves that you’re not just a tourist passing through; you’re here to invest in Indonesia’s real estate market.

4. Omnibus Law and Spatial Plans

Thanks to the Omnibus Law, local governments in Indonesia are now required to upload spatial plans to the OSS System. What does this mean for you? It streamlines the process of checking if your potential property complies with specified land use regulations. It’s like having a GPS for navigating the bureaucratic maze of property ownership.

So, there you have a list of essential terms and conditions for foreigners looking to own property in Indonesia. With this information, you’ll be better prepared to embark on your Indonesian property ownership journey. Happy house hunting!

Types of Property that Foreigners Can Own in Indonesia

In Indonesia, foreigners can own various types of property through different arrangements. Here’s a breakdown:

Leasehold Property

Foreigners can acquire property through long-term leases, providing them with the right to use and develop the land or structure for an extended period.

Condominiums

Foreigners can own condominiums under the “Hak Pakai” (Right to Use) title, granting them ownership of the unit for a specified duration.

Hak Guna Bangunan (HGB)

This is a right to build and use the land for a specific period, usually up to 30 years, extendable for an additional 20 years, and even longer.

Hak Pakai (Right to Use)

This right allows foreigners to use and exploit state-owned land, often for commercial or industrial purposes.

Investment Property through a Local Entity

Foreigners can establish a locally registered company to purchase and own property for business purposes, subject to certain regulations.

Understanding these property ownership options helps foreigners navigate the Indonesian real estate landscape in compliance with local regulations.

6 Ways to Obtain Property As Foreigners in Indonesia

Foreign nationals (WNA) have several options for acquiring real estate in Indonesia. Here they are:

• Invest through a PT PMA: Foreigners can invest by setting up a foreign-owned company, adhering to BKPM requirements.
• Purchase Leasehold Property: Buy property with extended usage rights, avoiding full ownership.
• Acquire Property under Hak Pakai (the right to use) Title: Own property through a legal right for residential use.
• Obtain Property under Hak Guna Bangunan Title: Get the right to build and use land for a specified period.
• Make a Purchase Using a Passport: Some properties allow direct purchase using a passport.
• Buy through an Indonesian Nominee: Utilize a local nominee for simplified ownership.

These options offer foreign nationals diverse ways to engage in Indonesia’s real estate market.

How do Foreigners Purchase a Property in Indonesia?

Purchasing or leasing property in Indonesia can be intricate for foreigners unfamiliar with local rules. Simplify the process with these steps:

Establish a PT PMA

Create a PT PMA to enable property transactions, meeting Indonesia Investment Coordinating Board (BKPM) requirements. Using a local agency can streamline this process.

Engage a Professional Real Estate Agent

Working with a skilled real estate agent saves time and access a wider property range. They assist in negotiations, ensuring your interests are protected.

Search for a Property

Consider location, size, materials, and style when looking for property. Our platform can help you find the right match based on your preferences.

Check Property Licenses

Request the Certificate of Property and Building Approval (PBG) from the seller before negotiating. Lack of these documents may signal issues in the process of buying a house in Indonesia as foreigners.

Conduct Due Diligence

Verify land ownership, licenses, and contracts to avoid legal problems and ensure a worthwhile investment.

Down payment and Sales Purchase Agreement

Sign the SPA in the presence of a public notary, making a down payment of 10-30%. Ensure the SPA protects your interests.

Finalize the Transaction

Transfer ownership in the presence of a notary, paying the Transfer Tax (BPHTB) on time. Be cautious of unofficial price suggestions to minimize taxes.

Ownership Transfer

After completing payment and tax obligations, the notary transfers ownership, registered at the National Land Agency (BPN). The buyer receives a Property Certificate, solidifying legal ownership.

How Property Tax Works in Indonesia for Foreigners?

Since its economic reform, Indonesia has become a sought-after destination for many foreign business owners and investors to purchase a piece of property. Foreigners can benefit highly from one of the lowest property taxes on their properties compared to many other Southeast Asian countries.

The land and building tax, a state tax that is the most fundamental property tax in the country, is levied at 0.5% and serves as a regional income for local and central governments for their facilities.

Both parties must pay certain taxes when transferring land and building rights in Indonesia. The sellers pay an income tax on the sale of land or property, and the buyers pay an acquisition tax. The seller tax is as follows:

• 1% for simple flats or simple houses for their transfer of land or building rights
• 2.5% for regular buildings except for simple houses or simple apartments for their transfer of land or building rights
• 0% for government buildings and government’s special-assignment buildings for their transfer of land or building rights

The transaction value determines the buyer’s tax, which is 5%. However, specific individuals like diplomatic consulates or representatives of agencies of NGOs can get away from these taxes.

Other taxes related to the property are lease taxes applicable for tax & non-tax residents and construction tax, which applies when the construction of the building is done.

Taxation in Indonesia can be complicated and tricky. InCorp can assist with a tax consultation to avoid administrative risk.

Leasing Property as an Alternative to Buy A House in Indonesia

There are six main items we have pointed out to check before renting a property. They are:

1. Quotation and Payment

Renters must pay rent in Indonesian Rupiah. Some quotations still have US Dollars as their main nominals. However, foreigners must do prior planning before losing out on currency exchanges.

2. Duration of Lease

The usual lease term is 20-30 years, depending on the agreement. Ensure the lease can be extended if necessary and agree on payment terms beforehand.

3. Leasing Contract

Find out what items are covered in the leasing contract. The renter usually covers maintenance costs, air conditioning cleaning, water pump repair, and other utilities. 

Discuss an agreement where more significant expenses need to be paid by the rentee. An agreement on whether monthly fees like electricity, water, internet, and phone bills are included in the payments should be made.

READ MORE:

• A Guide to Property Tax in Indonesia
• The Ultimate Handbook for Managing a Rental Property in Bali
• The Growing Potential of Property Investment in Surabaya

4. Security Deposit

Making a security deposit is standard and is usually priced at one month’s rent after signing the lease. Ensure the security deposit is 100% refundable and no fine print is included in the agreement.

5. Renewal Right

The option to renew the lease should be made available and priority to the renter. During renewal, the price will usually increase. Ensure that you know the current land pricing to avoid getting duped.

6. Sublet Right

Sometimes, some homeowners allow tenants to sublet the area to other renters. Renters or foreigners must discuss this with the landlord before signing the agreement.

Can Ownership of Land for Foreigners be Acquired through Marriage?

According to the Indonesian Marriage Law of 1974, an Indonesian citizen marrying a foreigner may lose Hak Milik rights. However, the couple can sign a prenuptial, postnuptial, or post-marital agreement to maintain property rights. While not covered by the Marriage Law, these agreements allow the Indonesian spouse to own property legally, enabling the foreign spouse to purchase and own it through the Indonesian spouse acting as a property nominee.

Obtain Your Dream Property with InCorp Indonesia

In conclusion, owning property in Indonesia as a foreigner can be complex, involving various regulations and requirements. To streamline this journey and minimize the associated hassle, consider enlisting the land and property ownership service of InCorp Indonesia. 

Our experts possess the knowledge required to navigate these regulations, and we offer a comprehensive company registration service. We facilitate a seamless process to help you achieve your dream of owning property in Indonesia.