Who can buy property in Indonesia?

Foreigners are not permitted to own land outright in Indonesia. However, they can acquire property, such as houses or apartments, through "Hak Pakai" (Right to Use) leasehold agreements. This arrangement allows foreigners to lease the land for a specified period, usually 30 years, with the option to renew for an additional 30 years. Although direct ownership of land isn’t allowed, foreigners can secure land use rights via leasehold agreements, which grant them the ability to use, build on, and develop the land for the duration of the lease term.

In Indonesia, property ownership for foreigners is governed by specific regulations and property titles, each with distinct conditions:

• Sertifikat Hak Milik (SHM): Known as the "certificate right to own," SHM is a freehold title that grants full ownership rights over land or buildings in Indonesia. However, under Basic Agrarian Law No. 5/1960, only Indonesian nationals and specific Indonesian entities can hold property under this Hak Milik title, which is off-limits to foreign buyers.
• Hak Pakai (HP): Foreigners can acquire property in Indonesia under a Hak Pakai, or "right-to-use," title, though this requires meeting particular conditions, such as compliance with investment standards and holding a valid work permit. Only certain properties are eligible for this title.
• Hak Guna Bangunan (HGB): This title, "right to build," allows legal entities to own a building on Indonesian land for up to 80 years, provided they meet the title’s legal requirements. While HGB does not grant land ownership, it permits substantial long-term use rights.
• Leasehold: For foreigners, leasehold agreements provide a common avenue to access property in Indonesia, allowing a long-term lease of land and buildings, typically up to 25 years. Leaseholds are popular among individuals and foreign-owned companies (PT PMAs) for both residential and commercial use.
• PT PMA (Foreign-Owned Company): Foreigners can invest in real estate through PT PMA, a foreign-owned Indonesian company. This approach also enables foreigners to obtain a temporary stay permit, generally valid for two years, facilitating longer-term investment and residence.
• Passport: Foreigners can purchase property with only their passport if they meet the minimum capital investment requirement, though this approach is typically limited to properties under Hak Pakai or leasehold arrangements.

Do the research

Investing in Indonesian real estate offers considerable potential due to the country’s growing economy, young and expanding population, and increasing demand for residential and commercial properties. As Southeast Asia’s largest economy, Indonesia has seen rapid urbanization, especially in major cities like Jakarta, Bali, and Surabaya, leading to a rising need for housing, office spaces, and retail facilities. Real estate values in prime areas have shown steady appreciation, and there is a strong rental market driven by both domestic migration and the influx of international tourists in popular regions like Bali.

The Indonesian government has introduced reforms to encourage foreign investment in real estate, including allowing certain types of property ownership for foreigners, which makes the market more accessible. The country's rich natural beauty, cultural appeal, and status as a top tourist destination further enhance the demand for vacation homes and rental properties.

Below are some popular destinations for real estate investment in Indonesia:

• Jakarta - As Indonesia’s capital and economic hub, Jakarta is a prime location for residential and commercial real estate. Key areas like Central Jakarta and South Jakarta are popular for their vibrant lifestyle, business centers, and modern amenities. With a range of high-end apartments and mixed-use developments, Jakarta remains a top choice for investors seeking urban properties with growth potential.
• Bali - Known for its stunning beaches, cultural appeal, and tropical climate, Bali is ideal for holiday homes, resorts, and luxury villas. Areas like Seminyak, Ubud, and Canggu are especially popular among tourists and investors alike due to Bali’s thriving tourism industry and strong rental demand, making it a preferred destination for those looking for investment properties in a resort setting.
• Surabaya - As Indonesia's second-largest city, Surabaya is a bustling port city with a growing demand for residential and commercial spaces. With ongoing infrastructure development, the city offers promising real estate opportunities in neighborhoods like West Surabaya and Central Surabaya, where modern apartments, offices, and mixed-use properties cater to the city’s urban growth.
• Bandung - Located in West Java, Bandung offers a cooler climate and is known for its scenic landscapes and academic institutions. Real estate options here often appeal to those looking for a quieter lifestyle with easy access to Jakarta. Areas like Dago and Lembang are known for their residential and vacation properties, attracting investors interested in holiday homes and rental properties.
• Lombok - Neighboring Bali, Lombok is an emerging destination for real estate investment, with its own pristine beaches and growing appeal for tourism. With areas like Kuta and Senggigi developing rapidly, Lombok offers opportunities for those interested in beachfront properties and villas in a tranquil setting, ideal for holiday investments.

Where to find properties online:

• https://www.lamudi.co.id/
• https://www.rumah123.com/
• https://www.99.co/id

Financing

Foreigners can obtain mortgage loans in Indonesia, although the process is generally more complex compared to local buyers. Indonesian banks typically have stricter requirements for foreigners, often requiring proof of legal residency, such as a KITAS (Temporary Stay Permit) or KITAP (Permanent Stay Permit), as well as proof of income and financial stability. Foreigners can also face limitations on the types of properties that are eligible for financing. For instance, mortgages for properties under the "Hak Pakai" (Right to Use) title are generally more accessible, as this is one of the titles foreigners can legally hold in Indonesia. However, banks may request higher down payments, typically around 30%-50%, and may apply additional interest rates to foreign borrowers. In some cases, foreigners may also secure financing through international banks with branches in Indonesia or by establishing a PT PMA (foreign-owned company) if the purchase is for business purposes.

Due Diligence and Sales Contract 

Due diligence in Indonesia requires a comprehensive investigation of the legal aspects associated with a property transaction. The main goal is to identify any potential legal issues that could impact the deal, ensuring the property is free from encumbrances and that all parties have the authority to proceed with the sale or purchase. Working with experienced legal professionals knowledgeable in Indonesian property laws can greatly enhance the due diligence process, helping buyers navigate complexities and secure a reliable investment.

In Indonesia, real estate transactions typically involve a formal Sales and Purchase Agreement (Akta Jual Beli), which is a legally binding document outlining the agreed terms between buyer and seller. This agreement, prepared by a certified notary, includes crucial details such as the property’s purchase price, payment terms, property descriptions, and any specific inclusions or exclusions. For foreigners who cannot directly own land but wish to invest in property, a Lease Agreement (Hak Sewa) is a common alternative. The Hak Sewa allows foreigners to lease property for an extended period, typically up to 30 years, with the option to renew. The lease agreement defines rights such as the lease duration, payment structure, renewal terms, and permissible uses of the property, giving foreign investors long-term usage rights without full ownership. Together, the Akta Jual Beli and Hak Sewa provide different pathways for property acquisition in Indonesia, depending on nationality and ownership eligibility.

Property Buying Costs and Taxes in Indonesia

Footnotes to Transaction Costs Table

Transfer Tax: 
Transfer tax is levied on the sale of real property in Indonesia at a flat rate of 5.00%. The base is the transfer value of the property.

Sale and Purchase of Land Deed
The execution of the sale and purchase of the Land Deed is made before Land Officials, namely a notary public appointed by the Head of the National Land Office (PPAT) or a local Head of a District (Camat PPAT). The cost is 1% to 2% of the property value.

Legal Fee:
Legal fees are negotiable. Processing fees for legal documents are at around 0.50% to 1.50% of the property value.

Real Estate Agent's Fee:

A real estate agent's fee is around 3.00% to 5.00% of the property value. The fee is generally paid by the seller.