Most people don’t know where to start when it comes to investing in property in Indonesia. So we have provided a brief summary below of the various ownership options available.
Note: This information is a guide only and is not to be constituted as legal advice. We can assist with putting interested parties in touch with the relevant legal consultants to advise and assist with transactions.
(FREEHOLD)
Ownership of Freehold land is a benefit only available to Indonesian citizens. Foreign citizens who wish to acquire land with freehold status often partner with an Indonesian citizen who they have an existing relationship with and trust to be the legal owner of that land. The Foreigner pays for the land and signs several non-registered legal agreements to gain beneficial ownership and control over that land for their own use. The Indonesian partner will normally charge an annual fee and percentage of the eventual selling price as part of this arrangement.
(LEASEHOLD / RIGHT TO BUILD)
Leasehold land is an endorsed legal and transparent way for foreign citizens to invest in land in Indonesia, albeit only where they intend to build within a set timeframe. Leasehold titles are registered by the government and can be held either in an Indonesian citizen’s name or by an Indonesian legal entity. These entities can be a set up as a PT / limited liability company under Indonesian law and domiciled in Indonesia. The company can be structured to be either 100% foreign owned, operated jointly under a JV partnership or 100% Indonesian owned.
Leasehold titles normally run for a maximum of 30 years and are extendable by 20 year periods indefinitely. This title can be transferred to or inherited by both foreigners and Indonesian citizens. Banks and financials institutions will accept HGB land for mortgage and securitisation purposes because it covered by the same planning and land use provisions as Freehold land.
(RIGHT OF LEASE OF BUILDING)
Foreigners, Indonesian citizens and Indonesian domiciled companies have rights to lease land and buildings on land classified as Hak Sewa Bangunan which can be arranged directly between the Lessee and the Lessor.
(RIGHT OF USE)
Some foreigners prefer to use the “Right of Use” ownership structure, which is an official certificate issued by the land registry and can be granted over Freehold or even State-owned property and this certificate has precedence over any other certificate issued. It is only for landed houses in certain areas with a reasonably high minimum value. It can be issued to foreigners who are domiciled in Indonesia and also companies domiciled in Indonesia. A foreigner may only have one Right of Use certificate which is normally issued for 30 years with 20 + 30 year extensions possible, up to 80 years in total. This certificate is freely transferable and can be inherited by both foreigners and Indonesian citizens.
