Know your rights when owning property in Indonesia as a foreigner
Whether you own, buy, or inherit property in Indonesia, there are a few things you need to know as a foreigner.
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Can foreigners own property in Indonesia? There are different levels of control and ownership depending on who you are and what you do with the property.
In this article, we go over the three most common scenarios of property ownership in Indonesia.
As a foreigner, you cannot buy a right to own (hak milik) certificate. However, there are two scenarios in which you as a foreign national can inherit property in Indonesia:
- You are married to an Indonesian and they pass away
- You are a child of an Indonesian citizen but you are a citizen of another country
Both of those situations come with the requirement to sell your certificate of right to own (sertifikasi hak milik or SHM) within one year. Otherwise, your property will be passed on to the Indonesian government.
Inheriting property from your Indonesian spouse
The prerequisite of inheriting property is a prenuptial or postnuptial agreement between you and your spouse. The agreement should declare you as the recipient of the property. Note that the agreement must be registered by a notary in Indonesia and should be done as soon as possible.
If your spouse passes away without the agreement the property will be inherited by the spouse’s family.
Inheriting property from your Indonesian parent
If you are an Indonesian citizen then you are free to inherit the property as usual. However, if you hold a different nationality (which includes dual citizenship) then you must sell your right to own within one year.
As previously mentioned, only Indonesian citizens can buy the right to own certificates. However, as a foreigner you can hold the following certificates:
- Hak Sewa – right to rent
- Hak Pakai – right to use
Right to rent (hak sewa)
Right to rent is essentially just the rental agreement between the landlord and you. The only restriction is that you need to either have a KITAS, representative office, or a company (PT or PT PMA).
Right to use (hak pakai)
Right to use is the closest thing to property ownership a foreigner can have in Indonesia. Unlike a simple rental agreement, it gives you the rights for the property for thirty years and can then be extended for a further 20 + 30 years. The extensions are based on the agreement between the landowner and yourself.
The best ways to be eligible for a right to use certificate is to either get a residence permit (KITAS) or to open a representative office. For companies (PT or PT PMA) we recommend going with the right to build (hak guna bangunan) which we will cover in the next section.
If you don’t have a KITAS, you can opt for an employer of record service where you are formally an employee of Emerhub and therefore qualify for the KITAS.
Alternatively, you can open a representative office which then acquires the right to use. The benefit of using an employer of record is that it doesn’t give you any reporting requirements. The representative office, however, costs less in the long run.
Both locally owned (PT) and foreign-owned companies (PT PMA) can hold the following property certificates in Indonesia:
- HAK GUNA USAHA (right to cultivate)
- HAK GUNA BANGUNAN (right to build)
The former is rather uncommon among foreign companies since it’s for farming activities and therefore we will focus on the hak guna bangunan.
Lately, the Indonesian government increased the minimum paid up capital requirements from Rp. 2.5 billion to Rp. 10 billion (from ~200,000 USD to ~800,000 USD). This has made many foreigners reconsider whether opening a PT PMA solely for property ownership is worth it.
Our advice is to go with the KITAS or representative office unless you are involved in large-scale property transactions.
One of the key benefits of owning a right to build (hak guna bangunan) is that you can use it as a collateral for a loan.
There is one type of property ownership we haven’t covered in this article but which is still fairly common – buying property under the name of an Indonesian person.
This method, unless the person is your legal spouse, gives you absolutely no rights for the property.
And if you do want to buy property on behalf of your spouse – make sure to get the prenuptial or postnuptial agreement in place as mentioned in the beginning of this article.
Get in touch with Emerhub’s property experts by filling the form below to discuss the best way for you to buy or rent property in Indonesia.
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