Foreigners cannot own properly a property in Indonesia. All property, land or buildings, have to be registered in the name of an Indonesian citizen. However, you have multiple solutions own safely a property :
– You will need an Indonesian citizen as a so-called “nominee”. This Indonesian citizen will be mentioned as the legal owner on the land certificate (title document). To protect your interests as a buyer you will have to make an agreement with this nominee at a notary’s office.
– PMA (international company) can buy in Freehold if the company is domiciled in Indonesia. But there is a lot of restriction, and it depends on the domain, the function of the company. So we could advise you a lawyer to inform you.
Choosing carefully a nominee :
If you are considering buying a property with a freehold title (Hak Milik) it is sensible that you already have a relationship with your Indonesian nominee, although in many cases the seller’s nominee can also be your nominee if this person agrees. A power of attorney (Surat Kuasa) is drawn up, so you as the buyer, have the full right to do what you want with the property. So you can sell it on or rent it out if you so choose. There will also be conditions that you are free to renovate or extend the house without needing to seek permission from the nominee. The documents should also contain clauses so that the nominee is obliged to cooperate with you to protect your interests and cannot try to prevent you selling the property if you want to. If the Indonesian law changes in the future to make it possible for a foreigner to legally own land in Indonesia then the nominee is willing to change the freehold title (hak milik) into your name.
When you lease a property you will lease it for the period in the lease contract which is usually a basic of 25 years, but can be anything between a couple of years to more than 50 years, as most of the time you can get an option for extending the lease until 25/30 years (depending on the lease agreement being offered and what you want). In this case, the total amount of the property transaction has to be paid upfront, before lease periods start.
Basically, when obtaining a lease contract, you become the effective owner of that property for the period of the lease with all obligations and privileges that come with the property. You have the right to sell the lease and you should also include it in your will. If the lease contract does not have an agreed extension condition then the property will be returned to the landlord after the agreed period and he/she can put it on the market again or whatever he/she wants to do with it. In most cases, the purchasing price will be less than a property with a freehold title.
– Details: Hak Milik/ Hak Pakai :
It seems, that the Indonesian government has responded to the need of foreigners to be able to invest in a home in Bali, without needing an Indonesian nominee. This arrangement is called “Hak Pakai”. Hak means right, and Pakai means use, so it’s “Right of Use”. Hak Pakai can be issued to (foreign) individuals, but also to companies, which are domiciled in Indonesia. Hak Pakai is for people living here, therefore in possession of a permanent resident visa, a document named Kitas. It does not mean that you cannot leave Indonesia, or cannot own property in other countries as well. It just means that you spend the major time of the year in Indonesia. Hak Pakai is not the same as Leasehold (Hak Sewa). Leasehold is a notary contract with an owner, and the ownership certificate doesn’t change. Hak Pakai is an official certificate issued by the land offices. A foreigner can only have one Hak Pakai title on his or her name. The Hak Pakai certificate is valid for an initial 25 years, and can be renewed after that. Some companies seem to offer prepaid renewals for up to a total of 100 years. It’s freely transferable to another name, so you can buy and sell existing Hak Pakai titles. So, if you want the property on your own name in Indonesia, and you are planning to live here, use the Hak Pakai arrangement.