Rules for Foreigners buying properties in Indonesia:
Expatriate business people in Indonesia have rightful concern regarding land use and ownership rights for business purposes. Act No. 5 of 1960 regulates the umbrella law regarding rights over land ownership. The law covers some rights – mostly those to Indonesian citizens – namely rights of ownership (hak milik), building rights on land (hak guna bangunan), cultivation rights on land (hak guna usaha) and rights of use (hak pakai).
With the emergence of foreign investment and business in Indonesia, many foreign investors need buildings or land for their company. A foreign investor who wants to run their business in Indonesia can obtain building/office or land under these following rights:
Building Rights on Land
The right to build and possess a structure on land owned by others: The duration of right for the building is maximally 30 years, extendible for 20 years (article 30 Act No. by 5/1960). This right can be transferred to other persons selling and inheriting, who also can secure a loan, as a Hypothec Right.
Those who may obtain right-to-build deeds are Indonesian citizens and legal entities (such as a PT/limited liability company) established under Indonesian law and domiciled in Indonesia, either for 100 percent foreign-owned, joint venture or 100 percent Indonesian-owned companies.
Foreign investors who desire to establish their business in Indonesia can have their building/office under a “rights to build” deed for a stipulated period.
Cultivation Right on Land
This is a right to cultivate on state land for agriculture and farming enterprises. The duration is maximally 25 years, extendable for 35 years, and should be registered at the Land Register at the National Land Agency (Badan Pertanahan Nasional/BPN). As in Right to Build, Cultivation Rights can secure a loan by delivering the certificate of Cultivation Rights to the lender.
Indonesian citizens can own these rights, as can legal entities (such as PT/limited liability companies) established under Indonesian law and domiciled in Indonesia, either for 100 percent foreign-owned, joint venture or 100 percent Indonesian-owned companies.
Right of Use
This is the right to use and/or harvest from land directly owned by the state (rendered by authorized official government deed), or private land (by agreement with the owner of the land). This may be applied to land for use as a building site or for agricultural purposes. The transfer of this right must have local government authorization.
Right of Lease of Building
A person or Indonesian legal entity has rights to lease another’s land. This right belongs to Indonesian citizens, foreigners, and legal entities (such as PT/limited liability companies) established under Indonesian law and domiciled in Indonesia or the representative office from a foreign legal entity. The leasee and the leaser can make an agreement to arrange it.