How to Buy Property in Indonesia as a Foreigner

Whether in Bali or in lesser-known locations such as Surabaya, buying property in Indonesia presents a unique set of challenges and opportunities for foreigners. I spent two summers in Bali speaking to locals and real estate agents. The process is not overly complicated but it requires some thorough attention to detail. Having a local to assist you along the way, is a big plus!  

You can read more on the challenges of buying property as a foreigner in Bali in this article and what the top spots to live are in Bali.

Key Takeaways

• As a foreigner, you can invest in Indonesian property through leasehold agreements or Hak Pakai titles.
• Full ownership is not permissible for non-Indonesian nationals, emphasizing the need for alternative arrangements.
• The purchasing process is multifaceted, necessitating legal guidance and a comprehensive understanding of Indonesian property law.

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Can Foreigners Buy Property in Indonesia?

Yes, you can. There are specific regulations and restrictions in place that dictate how and what type of property can be acquired by non-Indonesian nationals. While full ownership, known as “Hak Milik”, is not available to foreigners, there are legal avenues such as leasehold agreements or “Hak Pakai” (Right to Use) titles that allow for long-term property investment.

Navigating the purchase of property as a foreigner in Indonesia requires thorough research and often the assistance of legal experts. A real estate agent, experienced in supporting foreign buyers, can guide you through the process. You will require a specialist property lawyer to help navigate through the legal paperwork and the intricacies of the leasehold system. You need to consider the long-term view when entering such leasehold agreements, often stretching for an initial period of 30 years with options for renewal.

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Understanding Property Ownership in Indonesia

In Indonesia, property ownership regulations for foreigners are distinctly outlined and subject to legal constraints. Such nuances necessitate a comprehensive grasp to navigate the real estate market effectively.

Types of Property Rights for Foreigners

Buyers from abroad are not allowed to own land in Indonesia. You can typically engage in property transactions under specific types of ownership rights:

• Hak Pakai (Right to Use): Allows you to use and derive benefits from land that is not personally owned. You can obtain this right if you’re a foreign resident or if you’re legally domiciled in Indonesia.
• Hak Guna Bangunan (Right to Build): Permits the construction of buildings on land owned by another party for a certain period.

Legal Restrictions and Requirements

Foreigners must adhere to several stipulations when acquiring property in Indonesia:

• Land Size Limits: There is a maximum area of land that foreigners can own under Hak Pakai, differing by region.
• Ownership Duration: Hak Pakai is typically granted for 25 years and can be extended up to a total of 70 years, provided the conditions are met.

Entities must ascertain compliance with Indonesian Law concerning property acquisition and seek professional advice to navigate these legal frameworks.

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Government Support for Foreign Buyers

As mentioned above, there are some restrictions for foreigners buying real estate in Indonesia. However, the government has in recent years introduced initiatives such as tax incentives and simplified regulations. The Indonesian government further aims to attract foreign investors through infrastructure development and urban planning. It is advisable for you to seek local expert advice as government policies tend to change over time. 

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The Purchasing Process for Foreigners in Indonesia

Buying property in Indonesia for foreigners involves a nuanced process that requires attention to legal details and compliance with specific regulations. The steps range from selecting the ideal property to completing the transaction legally with all the necessary paperwork.

✅ Selecting a Property

If you’re interested in Indonesian real estate, you must adhere to certain regulations, such as minimum price requirements that vary by region. For instance, in Jakarta, the minimum price for landed houses starts at IDR 10 billion, while apartments are set at IDR 5 billion. You will need to research and identify properties that align with these regulations as well as with your personal preferences.

✅ Hiring Legal Assistance

If you’re seeking to buy property in Indonesia, it’s best to hire legal assistance. An experienced local attorney will help you navigate the legal intricacies, ensuring that all actions are compliant with local laws and that the purchasing process proceeds smoothly.

✅ Obtaining Necessary Permits

You must secure the necessary permits for property ownership. This involves providing required documentation, like immigration documents, which usually include a passport or visa. The exact documents needed may be specific to the type of property and individual circumstances.

Residency is not a strict requirement for buying property in Indonesia. However, a tourist visa will not be enough to purchase real estate. A work permit or a long-term visa will make the process a lot easier.

✅ Overview of the Purchasing Process for Foreign Buyers: 6 Steps

Here is an overview of the buying process including all permits required:

1. Register as a PT PMA (Perseroan Terbatas Penanaman Modal Asing). This is a type of company that is designed for foreigners.
2. Apply for the property certificate at the Indonesian National Land Office (BPN).
3. Complete the payment and show proof of payment.
4. Ensure that the conditions for Hak Pakai and Hak Guna Bangunan are satisfied.
5. Obtain the building permit (PGB) which offers construction rights.
6. The Indonesian National Land Office (BPN) will issue the property certificate in the registered PT PMA name.

✅ Financing the Purchase

Securing financing as a foreigner can be complex. Traditional mortgage options may be limited, and you must consider alternative funding sources like personal savings or overseas loans. It is important to have a clear understanding of the payment process, which might include leasehold agreements for a set period.

✅ Completing the Transaction

The final step in the purchase process is completing the transaction. This typically involves signing a leasehold agreement, which can last for an initial 30 years with the option to extend. All necessary fees and taxes must be paid, and the leasehold title should be registered under your name.

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Taxes and Fees Involved in Buying Property

Buying property in Indonesia as a foreigner comes with a set of taxes and fees that you’re required to pay. Here is a list of taxes and fees:

• Transfer tax (BPHTB): This transfer tax or land acquisition tax is calculated at a flat rate of 5% on the Tax Object Acquisition Value (NPOP). The NPOP is basically the same as the purchase price. Before applying the 5%, the NPOP is deducted by the non-taxable real estate objects (NPOPTKP). This NPOPTKP is set by the government and differs from region to region.
• Land and Building Tax (PBB): The PBB is paid annually by the individual or entity that has the right to control or that owns the land. The tax is based on the property’s valuation at a rate of 0.5%. It involves a certain calculation which is detailed in this guide.
• Value Added Tax (VAT): The VAT or PPN is only paid when buying or leasing property or land from a commercial company, such as a constructor or developer. It tax rate is at 11%.
• Income Tax and Lease Tax (PPH): This tax only applies when you are leasing and is based on the lease value. The rate of the lease tax is around 10% depending on which region you are in. A seller of a freehold property has to pay an income tax of 2.5% of the sales price.
• Documentary Stamp Tax (DST): The cost for the standard stamp duty currently lies at IDR 10,000 ($0.63) and is paid when legalizing the paperwork.

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Conclusion: Buying Property in Indonesia as a Foreigner

The Indonesian government has introduced incentives for foreign investors like you, which simplifies the buying process considerably. However, there are still a lot of bureaucratic loops to jump through before finalizing a purchase. Obtaining local expert advice is highly recommended.