For many years Indonesia has decreed that land in Indonesia can only be owned by Indonesian citizens. Thus, if you want to buy a house (as a foreigner), this would have been legally impossible.
In the late 90s, new laws were enacted so that foreigners are permitted to purchase apartments and office space in Indonesia, IF the building has a strata title status. This enables the foreigner to own the apartment or office space but not the land on which it stands.
Further laws were passed in 2010 which may make it easier for expats to hold 70-year leases on land, but the particulars/interpretation/implementation of the law isn't always clear.
Indonesian Agrarian Law, Law No. 5 of 1960, governs the ownership of land in Indonesia. In it is a category of land ownership called "Hak Pakai" which mean the right to build on/use the land. As stated in this law, foreigners are only permitted to purchase land or homes under the “Right to Use” (Hak Pakai) title.
In the late 90s, new laws were enacted so that foreigners are permitted to purchase apartments and office space in Indonesia, IF the building has a strata title status. This enables the foreigner to own the apartment or office space but not the land on which it stands.
Further laws were passed in 2010 which may make it easier for expats to hold 70-year leases on land, but the particulars/interpretation/implementation of the law isn't always clear.
Indonesian Agrarian Law, Law No. 5 of 1960, governs the ownership of land in Indonesia. In it is a category of land ownership called "Hak Pakai" which mean the right to build on/use the land. As stated in this law, foreigners are only permitted to purchase land or homes under the “Right to Use” (Hak Pakai) title.
April 2015 Update Foreign Property Ownership under the Magnifying Glass in Indonesia
Purchasing an Apartment or Office under Strata Title
Purchasing an Apartment or Office under Strata Title
Ownership of offices and apartments is possible through strata title deeds, but you need to be very cautious when dealing with the laws and regulations to ensure that your ownership of an apartment in a high rise building is secure.
The 1996 regulation (No. 41/1996) states that foreigners who reside in Indonesia, or visit the country regularly for business purposes, can purchase a home, apartment or condominium as long as it isn't a part of a government-subsidized housing development. However, foreigners can only hold land-use (hak pakai) deeds, and the development holds the "Hak Pakai" (right-to-build) deed. It's not possible for someone to have a land-use deed for a sub-unit of a right-to-build deed. The length of these titles varies as well. Therein lies some of the difficulties and unclear ownership issues.
This means that foreigners can effectively lease (not truly own) an apartment for up to 70 years, but not a free standing house. Within this 70-year period, foreigners must also periodically renew their right to use. The initial Hak Pakai period is for 25 years, then is renewed for an additional 25 years and finally a 20 year period.
Convertible Lease Agreement
Convertible Lease Agreement
One way for foreigners to go ahead an purchase property despite these legal ambiguities is to sign a Convertible Lease Agreement with the apartment property management office to purchase an apartment. Basically what this agreement entails is that the foreigner may purchase the apartment, but the title is still held in the name of the developer or property management firm, or an Indonesian nominee. This lease agreement is for a definite period.
The Convertible Lease Agreement states that if and when the prevailing laws and regulations permit the Lessee to become legal owner of the apartment/strata title unit, both the Lessor and the Lessee shall be obligated to sign a Deed of Sale and Purchase and the title shall be transferred to the foreign owner.
If you are interested in purchasing an condominium through this type of agreement, investigate the property management company thoroughly. Many property developers have undergone serious economic pressures and construction on many properties has been postponed or canceled. Show your contracts to a bona fide lawyer to ensure that all legal implications are covered thoroughly.
Further Note: When asked about the legality of Convertible Lease Agreements, lawyers we consulted stated very clearly that this is a VERY BAD idea and that lawyer should never advise that you to sign a Convertible Lease Agreement. As a foreigner you are entitled to Hak Pakai and you should insist that legal property status from the apartment building or developer so that the title is in your name. With a convertible lease agreement…you are totally at the mercy of the “appointed party” and that if they decide to change their minds you do not have much of a legal case against them as the agreement that the expat has between themselves and the Indonesian "appointed party" is not really a legal document.
It is best to just insist that the Hak Pakai is in your name. If the developer cannot provide a Hak Pakai document in your name, it may be because they do not haveHak Bangunan title. If this is the case, DO NOT BUY IT.
January 2012 update: Property Ownership Still Taboo for Foreigners in Indonesia, But 60 Year Leasehold by Non-Indonesians to Soon be Possible
January 2012 update: Property Ownership Still Taboo for Foreigners in Indonesia, But 60 Year Leasehold by Non-Indonesians to Soon be Possible
