Indonesian landlord and tenant laws are judged by the Global Property Guide to be slightly Pro-Tenant between landlord and tenant. Indonesian tenancy laws don’t strongly favor either party, but they do emphasize tenant protection in many cases—especially in residential leases. There are no specific landlord-tenant laws like in some Western countries, so lease agreements play a crucial role in defining rights and responsibilities.

Rents: Can landlord and tenant freely agree rents in Indonesia?

Rents are freely negotiated in Indonesia.

Rents are usually quoted in US dollar terms but paid in rupiah. Rents are typically paid in advance for the duration of the lease agreement. However, with an oversupply of rental units, tenants are now able to negotiate smaller advance payments or monthly payments. Tenants are also able to fix the exchange rate to protect them from devaluation of rupiah. Lease terms generally range from one to three years, depending on the agreement between the parties.

Rents are typically adjusted after 3 years, but the increase it typically capped at a maximum of 10% about the previous year's rental.

Deposits

Once a letter of intent is signed, tenants are usually asked to pay a booking fee equivalent to at least one month’s rent. This fee may be applied toward the advance rental payment or held as a security deposit, which is fully refundable at the end of the lease—assuming all terms of the agreement have been met. In apartment rentals, additional deposits may also be required for setting up telephone lines.

What rights do landlords and tenants have in Indonesia, especially as to duration of contract, and eviction?

Having a clear, legally valid lease agreement is a must for any rental setup in Indonesia. A well-prepared contract that follows Indonesian regulations not only safeguards the interests of foreign property owners but also lays out expectations clearly for tenants. Key points to include are the lease duration, payment terms, security deposit details, maintenance duties, and renewal conditions.

For foreign landlords, it's especially important to make sure the lease is written in Bahasa Indonesia, as the law requires. A bilingual contract—featuring both Bahasa Indonesia and English—can be a smart move to avoid misunderstandings and ensure the agreement holds up legally.

Under Indonesia’s foreign exchange regulations, all financial transactions carried out within the country—rental payments included—must be made in Indonesian Rupiah (IDR). As a result, foreign property owners are obligated to accept rent in IDR to stay compliant with local laws. This requirement also plays a role in how rental income is handled if the owner plans to transfer funds abroad, as it can impact the repatriation process.

Lease periods typically vary from 1 to 3 years. The terms depend upon the bargaining skills of the tenant and the landlord. Tenants typically have an option to renew.

Since most apartment units are rented out to foreigners, eviction is not a common problem. Expatriates lease the units for the duration of their assignment and typically leave before the expiration of their lease agreement. For some extraordinary cases, a "diplomatic clause" is inserted to allow the lease to be terminated if the expatriate is transferred outside of Indonesia.

How effective is the Indonesian legal system?

The effectiveness of the Indonesian legal system in eviction cases can vary. While the law does provide a legal framework for landlords to evict tenants under certain conditions—such as breach of contract or failure to pay rent—the process can be slow and complex. Legal proceedings often involve multiple stages and may take months to resolve, especially if the tenant contests the eviction. Enforcement of court decisions can also be inconsistent, particularly in areas where local authorities are hesitant to get involved in landlord-tenant disputes.

For foreign property owners, it’s highly recommended to include clear eviction clauses in the lease agreement and to consult with a local legal expert to navigate the process if issues arise.

Legislation

There are no specific provisions for landlord and tenant regulation. The general law covering land in Indonesia is Basic Agrarian Law (Law No.5 of 1960). The right of lease (Hak Sewa) is not registered with the National Land Agency. However in practice, some local land offices will allow notation of the lease to be made in the official land records and/or on the title certificate itself.