How can foreigners buy real estate in Indonesia? A step-by-step guide.

Real Estate in Indonesia for Foreigners: Exploring the Basics and Prospects

For foreign investors looking to invest in real estate in Indonesia, especially on popular islands like Bali, there are many questions regarding possible options and existing restrictions. The answer to this question is affirmative: yes, such opportunities are available, and interest in Indonesian real estate has been rapidly increasing in recent years.

Legal aspects and legislation

There are a number of specific points regarding land rights that are regulated by agricultural legislation known as the Land Ownership Act No. 5, adopted in 1960. This law divides property rights into seven categories, each with its own characteristics and requirements. At first glance, the legal system in Indonesia may seem confusing. However, upon deeper study, one can find that the system is actually functional, providing protection and security for all those involved in real estate transactions.

According to research by the analytical company Cushman & Wakefield, the Indonesian real estate market has been recognized as one of the most transparent and efficient in Asia, which is an important factor for foreign investors. When considering the purchase of real estate, you may have various doubts and questions. Don't hesitate to seek support from local real estate agents — they can offer free consultations.

Types of real estate rights in Indonesia

As for forms of ownership, Indonesia provides several main types of property rights. The most well-known are:

• Copyright- ownership.
• Hak sewa— the right to long-term lease.
• How to use- right of use.
• Right to use the building— the right to build.

Copyright

Hak milik, which translates to "ownership", is the highest degree of real estate rights. It is important to note that this right is available exclusively to Indonesian citizens. It implies full, unconditional possession, including the ability to sell, donate, lease and inherit. This right has no expiration date. However, for foreigners hak milik is not available, but there is an alternative: a foreign investor can sign a notarized loan agreement with an Indonesian citizen, and the property will serve as collateral. The main disadvantage of this mechanism is that the legal owner remains an Indonesian, so often this way is chosen by those who plan to obtain Indonesian citizenship in the future and register the property for themselves.

Hak sewa

Hak sewa, or the right of long-term lease, provides foreign individuals and legal entities, as well as Indonesian citizens, the opportunity to use real estate for an extended period. Owners of hak sewa have the right to manage their property, allowing them to live in it, rent it out, sell it, or pass it on as an inheritance.

Conclusion

In conclusion, it should be emphasized that the real estate market in Indonesia offers a wide range of opportunities; however, foreigners need to carefully study all the requirements and conditions to avoid potential risks. If you are planning to purchase property in this attractive corner of the world, it is important to consider the legal aspects and seek professional advice to effectively implement your plans. Ultimately, it can be said that the unique experiences of living and investing in Indonesia will always be relevant.

The importance of land lease agreements

An important aspect of leasing land plots is the need to coordinate all actions with their actual owners, which must necessarily be reflected in the contract being drawn up. Therefore, a thorough check of all accompanying documents becomes vital.

Rental periods in Indonesia

In Indonesian legislation, lease terms are not fixed and are determined solely by the conditions agreed upon between tenants and owners. Typically, the initial lease term ranges from 25 to 45 years, with the possibility of extension on a priority basis, which can vary from zero to 50 years.

After the main lease term expires, to extend the right to use the land, it is necessary to pay the market value, which currently amounts to approximately1,000 dollars.for each additional year taken.

Conditions for contract renewal

The tenant then has the option to negotiate terms for further contract extensions on either a priority or guaranteed basis. In the case of priority renewals, tenants are entitled to take advantage of the contract extension.

However, if the owner decides not to renew the contract, the tenants do not have a legal right to demand the continuation of the lease. In contrast, with a guaranteed extension, tenants will be able to retain the right to extend even if the owner changes, which is a significant advantage.

Verification of owner reliability

Before signing the contract, it is crucial to ensure the owner's good faith by checking for any outstanding debts or potential bankruptcy. In Indonesia, it is possible to register a leasehold for any number of real estate properties.

These transactions are notarized, but mandatory registration with state authorities is not required, which makes this format different from other forms of ownership. Additional costs associated with the registration of transactions under the conditions ofhak sewa significantly lower, which makes this type of ownership attractive to investors looking to increase their returns.

Lickhold restrictions

• Land under a leasehold cannot be used as collateral for obtaining a loan from the bank.
• This type of property does not provide the opportunity to obtain a residence permit.kitas.

For example, the world famous Hindu temple of Uluwatu is located around Bedugul in Bali, which emphasizes the value of this land.

Right of use

In connection with the lawhow to useBoth individuals and legal entities, including foreigners, can acquire real estate in Indonesia. Previously, foreigners were required to have a residence permit.kitasfor the purchase of properties with titlehow to useHowever, this requirement was canceled in 2023; now, just having a passport is enough to complete the transaction.

Name certificate for real estate

When a foreigner purchases real estate under this scheme, they are issued a personalized certificate, which is registered with a specialized government agency. This grants the buyer full rights to use the land or building.

Local real estate agents characterize such property as.freehold, which is subject only to the terms of the concluded contract. A named certificate is usually issued for a period of30 years, with the option to extend for more20and then on to additional30years, which in total allows renting the property for up to80 years.

Conclusion

In conclusion, the opportunities for investing in real estate in Indonesia are quite diverse and require a careful approach to the legal aspects of transaction processing.

Rules for property ownership in Indonesia

For eighty years, the property owner has the option to either obtain a new HP license or change their ownership status. If no actions are taken, the ownership rights revert to the previous owner or are transferred to the state.

Real estate re-registration

When reselling property with a hak pakai title to an Indonesian citizen, such property will be re-registered as a standard freehold (hak milik). However, there are certain restrictions in place:

• Foreigners are allowed to own only one property registered with a hak pakai title.
• The maximum area of such property should not exceed two thousand square meters (20 acres).
• Government regulations limit the possibility of short-term rentals of such properties.
• Established minimum prices for real estate: for example, in Bali, the cost of a villa must be at least 5 billion rupiah (about 315 thousand dollars), and the price of an apartment - from 2 billion rupiah (about 125 thousand dollars).

Construction rights

As for the hak guna bangunan, this title is available to both Indonesian citizens and legal entities registered under local law. This includes foreign companies (PT PMA), where 100% of the capital can be owned by foreigners.

• Title provides the ability to own multiple properties and construct new buildings.
• The construction permit is issued for a period of 30 years, with the possibility of extending it up to 80 years.
• Owners holding the hak guna bangunan title have the right to resell land parcels or properties to third parties, transferring the rights to them.

Second home program

It should be noted that this title is intended exclusively for legal entities planning to carry out construction projects in Indonesia. Since 2022, the country has implemented a program called "second home," which allows foreigners to obtain a residence permit (kitas) for a period of 5 to 10 years.

• To participate in this program, it is necessary to make an investment in real estate or open a bank deposit of at least 2 billion rupees (about 130 thousand dollars).
• Property owners may qualify for residency status based on other criteria, such as as entrepreneurs, retirees, or digital nomads.

Taxes when purchasing real estate

When purchasing real estate, foreigners are required to pay all associated fees. There is a land and building tax for ownership of properties such as hak milik and hak guna.

• If foreigners rent out their properties, they must pay withholding tax (PPH).
• If a foreign citizen stays in the country for more than 183 days in a year, they become a resident of Indonesia and are required to pay personal income tax.

This creates additional tax obligations that should be considered when planning real estate investments and living regulations in this country.

Please note that citizens who are tax residents of Russia, i.e. those who spend more than 183 days a year in the country, are required to inform the Russian tax authorities of the existence of accounts in foreign banks or the registration of legal entities abroad. This notification may be necessary when conducting financial transactions.

Property search in Bali

If you are planning to purchase real estate on the beautiful island of Bali, start your search on our online resource, which offers a wide range of information about properties in Indonesia. On our portal, you can conveniently sort listings by various criteria, save your favorite properties, and subscribe to notifications about new options.

Alternative search options

An alternative option will be the ability to submit a request for property search according to your preferences, and our professional real estate agents will offer you the most suitable options.

Preparation for purchase

Before making a purchasing decision, it is highly recommended to familiarize yourself with the situation in the local real estate market. Study the latest news and analytical materials related to Indonesia to stay informed about all the recent events and trends.

The role of a realtor in a transaction

Although a realtor is not a mandatory participant in a transaction in Indonesia, most foreigners prefer to turn to specialists. The main task of a realtor is:

• Help in choosing real estate properties;
• Providing the seller with all the necessary information;
• Organization of a trip to Indonesia;
• Conducting negotiations with the seller on behalf of the buyer;
• Accompanying the transaction process.

In addition, many real estate companies offer services even after the deal is completed.

Growing interest in real estate in Indonesia

In recent years, there has been a steady increase in interest among Russian-speaking clients in purchasing real estate in Indonesia. This, in turn, has led to a rise in the number of realtors in this market. You can find both local companies with Russian-speaking specialists and international agencies that have their offices in Indonesia. Additionally, many developers in Bali employ Russian-speaking managers.

It's important to know about the purchasing process.

The process of purchasing real estate involves various types of ownership: hak pakai (user rights), hak milik (ownership rights), and hak guna (usage rights). The first step is to check the selected property. After choosing a residence, it is necessary to conduct due diligence. For this, the realtor will request several important documents from the seller:

• The last five receipts for land and construction tax payments, as well as confirmations of these payments;
• Original certificate for the land plot;
• Original building permit;
• Confirmation of payments for utilities, including water, electricity, and telephone;
• If the property has a mortgage, a letter from the bank will be required;
• Copies of the identity documents of the directors and the representative, if the seller is a legal entity;
• A notarized protocol of the meeting of participants with a decision on the sale, if the seller is a company.

Conclusion

This information will help you better understand both the purchasing process and the potential legal nuances related to real estate transactions in Indonesia. By thoroughly preparing for the property acquisition process, you will be able to avoid many pitfalls and successfully complete your deal.

Documents for processing the transaction

A buyer who is at the stage of completing a transaction is required to present certain documents. The main one is a passport or identification card. If the buyer represents a legal entity, copies of the identification documents of the directors and authorized representatives must also be provided. When conducting a transaction on behalf of a company, it is necessary to prepare complete documentation related to that organization.

Conclusion of a preliminary contract

At the next stage, a preliminary sales contract, known as the CSPA, is concluded. This document is a key part of the deal, as it outlines all the terms under which the parties are willing to cooperate for further work on the final agreement. In some cases, such a preliminary contract may require the seller to fulfill certain conditions or make an advance payment. The amount of the advance is usually determined by mutual agreement between the parties.

Drafting the main contract

The third stage of the transaction involves the formalization of the main sales contract, which is also referred to as Akta Jual Beli (AJB). The signing of this document takes place at a government agency responsible for land rights registration or in the presence of a notary. The standard set of terms includes information about the seller and the buyer, the existence of a document confirming the long-term lease of the land, as well as a statement regarding the transfer of property from one owner to another. Additionally, the contract includes guarantees from the seller, a re-check of the property boundaries, and emphasizes the absence of violations of property rights laws in the context of long-term leasing. The document must also contain sections addressing the resolution of potential disputes.

Payment for real estate

The final stage of the transaction is the process of payment for the acquired property. After both parties have signed the contract, they are required to pay the relevant taxes and submit documents confirming the payment to the authority responsible for land rights registration. Typically, after signing this agreement, the buyer makes the final payment. The methods of transferring funds are agreed upon in advance, as well as the deadlines for paying additional expenses.

Payment methods for Russians in Indonesia

As for the ways in which Russians pay for real estate in Indonesia, there are currently three main methods:

• SWIFT transferRegarding developers from banks in Russia that are not subject to sanctions.
• CryptocurrencySome developers accept such payments in their digital wallets. It is recommended to familiarize yourself in advance with the list of properties where this payment method is available.
• Payment in rublesA number of companies in Bali have their offices in Moscow and can accept cash payments.

Opening a bank account

It should also be noted that foreigners have the opportunity to open an account in a local bank in Indonesia. This allows them to transfer funds from their home country and use them to purchase real estate. Additionally, a residence permit is not required to open a bank account, and there are no restrictions specifically for Russians.

Registration of property rights in Indonesia

Property registration in Indonesia is carried out after all parties involved in the transaction have signed the necessary documents. It is crucial to complete the process within a maximum of seven days, during which certificates confirming the transfer of rights and accompanying documentation are prepared. The authority responsible for all these procedures is called pejabat pembuat akta tanah (PPAT).

Documents after registration

After successfully completing the registration, the buyer receives a set of official documents. This package includes:

• Notification of long-term lease confirmation;
• Original act of transfer of rights;
• Receipts for payment of land and construction taxes along with the corresponding confirmations;
• Certificate of land rights;
• Proof of completion of all necessary tax obligations;
• Copies of the identification documents for both the seller and the buyer.

Usually, the entire registration process takes no more than a month.

Features of the transfer of rights

It is important to mention that immediately after signing the documents, the seller often transfers the right to long-term lease of the land plot to the buyer, while some other papers may still be in the preparation stage. It should be noted that long-term lease contracts, referred to ashak sewaThey are often notarized, but do not require registration with official authorities.

Remote real estate purchase

As for real estate located away from major cities, in Bali and other regions of Indonesia, foreign citizens can carry out transactions remotely. For this, the buyer only needs to provide a power of attorney to their lawyer, who will then carry out all the necessary legal procedures. This power of attorney is intended solely for signing documents related to a specific transaction and does not grant the lawyer the right to dispose of the property for other purposes.

Examples of real estate properties

The Indonesian real estate market offers a wide variety of properties, among which the following stand out:

• Luxurious villa in Tabanan- Price: €3,862,926, area: 750 m², three bedrooms, modern design with panoramic sea views, located in a picturesque spot on a high plot, 15 minutes from the central areas of Canggu.
• Villa in Seminyak- Price: 413,885 euros, area: 620 m², five sleeping places, located in a quiet residential area, just a few steps from restaurants and shops, only 25 minutes from the airport thanks to easy access via Sunset Road.
• Luxurious villa in Chemagi- Price 2,115,412 euros, area 1200 m², five bedrooms, elegant architecture, just 150 meters to a beautiful black sand beach with stunning views of the sunset over the Indian Ocean.

In the dynamic corners of Canggu, you can reach your destination in just 15 minutes.

Villas with a studio layout, as well as those with one or two bedrooms, range in size from 80.7 to 154.1 square meters and are offered with complete finishing and stylish furniture designed by professionals. These properties feature large panoramic windows that allow you to enjoy stunning views of the surroundings. Each villa is equipped with a terrace, perfect for spending time outdoors, as well as other amenities for comfortable living.

Apartments in Indonesia

In Indonesia, you can find apartments with an area of 40 square meters priced at 91,036 euros. These luxurious apartments are located in a complex surrounded by stunning rice fields and picturesque mountains. The gated community features:

• public pool
• parking spaces
• rest areas
• innovative smart home systems

The best beaches, clubs, restaurants, educational institutions, supermarkets, and spas are located nearby.

Villa in Sesheh

Attention potential renters, a villa in Seshe is also available, covering an area of 192 square meters and priced at 688,889 euros. This property is perfect for rental. The complex consists of 15 exclusive private villas, located just 50 meters from the sea. High-quality construction and the use of the best finishing materials ensure a high level of comfort. The villas are situated on the beachfront and can be offered in a formatleaseholdorfreeholdThe terrace offers a stunning view of the sunset, creating a unique atmosphere for relaxation. Each villa has its own plot of land with a patio of 5 acres.

Villa in Ubud

Another option is a villa in Ubud with an area of 100 square meters, priced at 183,029 euros. These fully furnished homes come with private pools and offer a beautiful view of nature. All villas are move-in ready, providing investors with the opportunity to earn income with minimal effort. Additionally, there is the option for remote access to a personal account with data for business management. The expected occupancy rate for the villas is approximately 80%, and the payback period is around 6.5 years.

Villa in Tabanan

A villa in Tabanan is also available, with a total area of 190 square meters for 173,832 euros. These villas are located in a picturesque area with untouched nature and green rice fields. Trendy restaurants in Canggu are a 30-40 minute drive from the complex. This project offers villas with two or four bedrooms, which include:

• swimming pool
• terrace
• fully furnished with modern amenities

The area of the gardens is 65.5 square meters.

Other villa options

You can also find villas in Canggu with an area of 252 square meters priced at 374,336 euros with a type of ownership.leaseholdfor 28 years. Additionally, villas in Ubud with an area of 240 square meters are offered for 363,299 euros, which provide a similar type of ownership for 25 years. A townhouse in Seshe is for sale with an area of 117 square meters for 330,188 euros, which includes three bedrooms and a private garden with a pool. The purchase conditions are as follows:

• 30% down payment
• installment plan with 7 payments
• long-term lease for 28+30 years

This ultra-modern townhouse stands out due to its impressive and functional design, significantly surpassing standard options. The property is fully equipped with essential amenities, including a restaurant, gym, and concierge services.

Apartment in Kerobokan, Indonesia

DDA Real Estate offers a unique opportunity to purchase an apartment in the picturesque area of Kerobokan, located in Indonesia, for 72,660 euros. This apartment has an area of 50 square meters and includes 2 rooms, 1 bathroom, and a separate toilet.

There is an option to conduct an online viewing and also to finalize the deal remotely with payment in rubles. The property is located in a modern residential complex that offers many amenities for its residents. The average rental income from such properties is approximately 15%.

Property rightsThe properties are arranged according to a leasehold scheme, which implies the possibility of extending the contract in the future. All apartments are fully furnished and ready for comfortable living. The architecture of the residential complex is impressive, and there are commercial spaces on the lower level.

The list of services provided includes:

• concierge service
• laundry
• gym
• and other amenities

Stunning villa in Bali

In addition, DDA Immobilien is also offering a luxury villa in Bali, priced at €459,872. This villa is located just 500 meters from the beach and has a magnificent ocean view. It is scheduled for completion in May 2024.

The main characteristics of the object include:

• an area of 205 square meters
• 4 bedrooms
• 5 bathrooms
• private pool
• parking lot

The management company will provide additional amenities for the owners.

The second villa in Bali

Another luxurious villa in Bali is priced at €974,929 and stands out for its size. It has an area of 350 square meters and a land plot of 1,500 square meters.

The villa includes:

• 4 bedrooms
• 4 bathrooms
• a pool measuring 5 by 12.5 meters

A fully furnished interior and a 20-year leasehold agreement with an option to extend will make this property attractive to investors.

The third villa with a picturesque area

The villa, priced at 390,891 euros, impresses with its picturesque spaces and convenient location near popular restaurants and shops. The main features of this property are:

• 180 square meters
• a plot of land measuring 470 square meters
• 3 bedrooms
• 4 bathrooms

The villa is also fully furnished and the leasehold term is 29 years with the possibility of extension.

Additional expenses when purchasing real estate

When making a decision to purchase real estate in Indonesia, it is important to consider additional financial obligations. In particular, the property transfer tax (BPHTB) is 5% of the property's value and must be paid by the buyer. However, in the case of a leasehold agreement (Hak sewa), this tax is not required to be paid.

For the primary real estate market, there may also be a need to pay value-added tax (VAT), which is 11% of the property's price. This tax also applies to transactions involving leasehold agreements (Hak sewa) and must be paid by the tenant or buyer if the transaction is conducted through the developer.

Legal costs

In addition to taxes, the buyer needs to consider the costs of notary services, which amount to about 1% of the total transaction costs. These expenses are usually borne by the buyer, as they have the full right to choose the notary. If necessary, the parties involved in the transaction can agree to share the costs equally.

The costs for legal services related to contract review can range from $200 to $300. However, if an investor plans to open a company in Indonesia, these expenses can rise to $3,000.

Conclusion

Ultimately, purchasing real estate in Indonesia appears to be a profitable investment. However, it is crucial to consider all associated costs and the specifics of the buying process to avoid unexpected situations and to effectively achieve your investment goals.

Conclusion

The conclusion of this article on real estate in Indonesia for foreigners summarizes many important points to consider when organizing a purchase. I hope the information provided in this material has been helpful and has allowed you to better understand the nuances of the Indonesian real estate market.

As I have already noted, foreigners have the opportunity to purchase real estate not only on popular islands like Bali but also in other regions of the country. However, it is important to remember that the approaches to ownership vary, and there are specific legal nuances. The division of forms of ownership —copyright,hak sewa,how to useandbuilding rights— shows how flexible the system can be, but it is the attention to detail that will ensure a successful deal.

It is important to understand that working with local realtors and legal advisors will greatly simplify your life. They can provide the necessary consultation and help you navigate the legal nuances that may seem complicated. I strongly recommend conducting thorough research and creating a clear action plan to minimize potential risks as much as possible.

Main recommendations:

• Carefully examine the legal aspects of each form of ownership.
• Collaborate with experienced local realtors.
• Develop a clear action plan for real estate purchases.

With each passing year, the demand for Indonesian real estate is growing, which can serve as a good signal for investors. However, approach the process with open eyes and a clear mind, considering both the legal aspects and the potential economic consequences of your investments. Ultimately, this is the only way to ensure that your dream of acquiring property in this exotic country becomes a reality, bringing not only joy but also financial stability.

Result

In conclusion, I want to emphasize that purchasing real estate in Indonesia requires not only an understanding of the law but also consideration of local traditions and culture. It is not just an investment; it is an opportunity to become part of a unique and beautiful world that attracts many of us. I hope that all the knowledge gathered here will be useful to you and serve as a solid foundation for your decision-making.