Understand Indonesian property ownership structures
After centuries of colonial rule, Indonesia instituted property laws forbidding foreigners from owning any property outright when the country gained independence in 1945. Over time, though, these laws have been amended and somewhat relaxed – making the Indonesian property market slightly more accessible to foreign investors.
There are seven types of ownership structures for property as per the Indonesian Agrarian Law, four of which are relevant to foreign investors. These are:
- The Right to Use (Hak Pakai)
- The Right to Build (Hak Guna Bangunan)
- The Right to Own/Freehold (Hak Milik)
- Leasehold (Hak Sewa)
For a foreigner, the “Right to Build” and the “Right to Own” are not feasible options as these are reserved strictly for Indonesians, which leaves the “Right to Use” and “Leasehold” as possible ownership structures for foreign investors.
With that said, the “Right to Use” and “Leasehold” arrangements are almost as good as the “Right to Own,” as a Hak Pakai certificate is valid for 80 years (extended automatically after 30 and 50 years) and a Hak Sewa certificate can be valid for between one and 80 years. In 2016, the government introduced a new regulation stipulating that foreigners can purchase a property in Bali for as little as IDR3 billion (US$225,073) under Hak Pakai – and this amount varies from region to region.
It is also important to note that in order to get approved by the government to purchase a property, you must first demonstrate that you intend to live, work, or invest in Indonesia – so careful planning must be done before applying.