Setting up a transparent rental business in Indonesia begins with a clear understanding of legal structures. Selecting the right legal framework is important to protect your investment, comply with zoning and permit requirements, and avoid legal issues.
This article will delve into regulatory frameworks for renting property in Indonesia, partnering with local experts.
1# Renting Out a Villa Short-Term
Emerhub takes care of all the paperwork to obtain the necessary building permits in Indonesia. For daily villa rentals, such as those listed on Airbnb, the correct legal structure is a PT/PMA with a Villa Rental Classification. We register your foreign-owned limited liability company (PT/PMA) under this classification, and make sure that your property is located in a tourism zone.
The building permit process involves 2 steps:
- A PBG (building planning approval) before construction
- An SLF (certification of building functionality) after the building is completed
Managing Multiple Villas for Daily Rentals
The legal structure for managing multiple villas as daily rentals is again a PT/PMA, but you must register each villa either as a separate company or as a branch of the main company.
2# Renting Out a Villa Long-Term
If your property is intended for monthly or yearly rentals, Emerhub registers a PT/PMA under a Real Estate Business Classification for you.
We make sure that your property is located in a residential zone, and obtain the required building permits, which again include the PBG (building planning approval) and the SLF (certification of building functionality).
3# Subleasing a Villa and Renting it Out Short-Term
When subleasing a villa for daily rentals, you must register a PT/PMA with the appropriate classification. Note that;
- If your property is below 4000 sqm, the business classification remains under real estate.
- If your property exceeds 4000 sqm, you can register it as a hotel under PT PMA.
Each property must be registered as a homestay (Pondok Wisata) in the name of an Indonesian person. You can obtain a Pondok Wisata license in 2 ways:
- By setting up a business (PT PMA) to apply for the license
- By partnering with an Indonesian citizen who applies on your behalf
Common Mistakes to Avoid in Renting Property
When renting property in Indonesia as a foreigner, the legal structure must align with your business model. If not, it may cause you severe fines or even imprisonment.
Here are the common mistakes that you must avoid:
Operating Daily Rentals in Residential Zones
Attempting to operate daily rentals (e.g., Airbnb) in residential zones without proper classification and permits
Incorrect Permit Acquisition
Failing to obtain the necessary permits, such as the PBG (building planning approval) and SLF (certification of building functionality)
Mismatched Rental Structures
Offering daily rentals under a monthly or yearly rental structure, or vice versa, without adhering to the specific permit and zoning requirements for each rental type
Choose Emerhub as Your Local Partner in Indonesia
Emerhub helps you to take proactive steps for a better experience in renting property in Indonesia.
Contact us via the link below. We will keep you informed with our local experts in the region about regulatory frameworks with your rental business.
Get help with licensing and compliance via Emerhub’s real estate team. Contact us for professional help with your building permit and when conducting land due diligence.