Posted on 16 July 2012.
By: Julia Tchezganova
When individuals move to Indonesia for the purpose of expatriation, the process usually involves a large number of personal and legal considerations. While it is vital to explore notions of belonging, finding proper communication outlets, and understanding how local culture works, it is nonetheless important to note topics of legal nature. The purpose of this editorial is to provide a general framework for you to think about if you arrive at the idea of land ownership in Indonesia.
It should be noted that regardless of where in Indonesia you reside – Bali, Jakarta, or elsewhere – unless the regulation states otherwise, the laws apply generally. In terms of land ownership for foreigners, the Basic Agrarian Law (Law No. 5 of 1960) limits foreigners from owning lands in Indonesia. Individuals are only permitted to acquire land under the “Right to Use” (Hak Pakai) land title. Hak Pakai is similar to a long term lease, it is granted for 20 years, and may be extended for another 20 years.
Foreign corporations have more options when obtaining land. Once a foreign investment is acknowledged as a legal person under Indonesian law, the investors may acquire two types of land titles, the Right to Build (Hak Guna Bangunan) Land Title, which is valid for 30 years and can be extended for another 20 years, and the Right to Utilize (Hak Guna Usaha) land title, which is valid for 35 years and can be extended for 20 years.
Hak Pakai and Hak Guna Bangunan are commonly granted for residential and business buildings, while Hak Guna Usaha is granted to businesses that require wide land for agricultural, industrial, or mining activities.
If you are interested in owning an apartment in Indonesia as a foreigner, you must know that you are able to purchase apartments in Indonesia if the building has a strata title status. But you will not hold the strata title of ownership; you can only hold the right of use. The two common ways to have property in Indonesia is purchasing property via a Convertible Lease Agreement or a Nominee Arrangement.
Convertible Lease Agreement allows foreigners to sign an agreement with the developer company. With this agreement, the foreigner is able to purchase property (an apartment, for example), but the title is held in the name of the developer. The lessee will obtain the right of ownership automatically if the law regarding ownership changes and allows for foreign ownership. You should know that there is no freedom of contract, and that the contract is generally drafted by the developer. As a result, whenever you contemplate signing a unilateral contract, you absolutely should consult a lawyer before handing over your purchasing rights or your funds.
For a Nominee Arrangement, foreigners give the trust to an Indonesian person, who purchases the property under the Indonesian name.
If you are a part of an Expat/Indonesian couple, the vital preparation for purchasing property is whether or not the Indonesian spouse and the Expat spouse have a prenuptial agreement for separation of property. If there is such an agreement, you can legally purchase the property, but it must be signed before marriage takes place.
Overall, land and property purchase for foreigners is a rather complex activity. Please refer to such websites such as http://www.expat.or.id/info/buyingproperty.html in order to research for more information. Do not hesitate to consult a lawyer, especially when it comes to signing anything. Be careful in trusting when it comes to the purchase of property.
It is highly recommended that if you are interested in land development or purchase of property that you seek representation from a law firm with real estate expertise.