Property rights in Indonesia for foreigners
Under current Indonesian law, foreigners as individuals may not directly own land in their own names.
However there are a number of legal titles that have the effect of allowing a foreigner to take interest in real estate.
1.Hak Milik – Freehold title. The ‘nominee system’ is a popular method that involves entering into a legal contract with an Indonesian citizen (the ‘nominee’). The nominee holds the freehold title to the property in his or her name, but signs over practical control to the foreigner through irrevocable power of attorney.
2.Hak Guna Bangunan – The Right to Build title. Forming an investment company, (Penanaman Modal Asing – PMA) is a practical method of effecting land ownership for those who intend to operate a business in Bali. A PMA company may own land in its own right, subject to approval of the company’s activity, and a foreigner may fully control a PMA company. The PMA company has title under Hak Guna Bangunan which is the right to build.
Usually such a right has an initial duration of 50 years. This can be extended for a further 30 years, giving an effective maximum period of 80 years. Prospective property owners should be aware that a Hak Guna Bangunan title involves tax implications, and that the Department of Trade will review the PMA company after 25 years to ascertain if it has been operating according to the criteria established when it was set up.
3.Hak Pakai – The Right to Use title. As it relates to foreigners, this title Under current Indonesian law, foreigners as individuals may not directly own land in their own names.
However there are a number of legal titles that have the effect of allowing a foreigner to take interest in real estate.
1.Hak Milik – Freehold title. The ‘nominee system’ is a popular method that involves entering into a legal contract with an Indonesian citizen (the ‘nominee’). The nominee holds the freehold title to the property in his or her name, but signs over practical control to the foreigner through irrevocable power of attorney.
2.Hak Guna Bangunan – The Right to Build title. Forming an investment company, (Penanaman Modal Asing – PMA) is a practical method of effecting land ownership for those who intend to operate a business in Bali. A PMA company may own land in its own right, subject to approval of the company’s activity, and a foreigner may fully control a PMA company. The PMA company has title under Hak Guna Bangunan which is the right to build.
Usually such a right has an initial duration of 50 years. This can be extended for a further 30 years, giving an effective maximum period of 80 years. Prospective property owners should be aware that a Hak Guna Bangunan title involves tax implications, and that the Department of Trade will review the PMA company after 25 years to ascertain if it has been operating according to the criteria established when it was set up.
is available to those who hold a residence permit (KITAS), and to PMA companies. For KITAS holders, the Hak Pakai title is granted for an initial period of 25 years. Renewals are usually available. For a PMA company, the title is granted for an initial 45 years, and may be extended for a further 25 years to a maximum of 70 years. Renewal is subject to a number of conditions, including that the land use still fits with government plans; that it has not been abandoned; and the PMA company is still in business and has not infringed tax law.
4. Hak Sewa – The Right to Lease title. This title is simple and straightforward and is available to virtually any individual or company. The property, and any improvements to it, reverts to the original owner at the expiry of the term of the lease. Lease periods vary, and extensions are often agreed in advance. In Indonesia, the entire cost of the lease for its entire duration is paid on signing the contract
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