How to Buy in Indonesia
Indonesia, the world’s largest archipelago, offers a diverse landscape for business and property ownership. Whether you’re a local entrepreneur, an international investor, or someone looking to purchase property, understanding the different types of ownership available is crucial. This blog aims to shed light on the various ownership structures in Indonesia, providing a comprehensive overview to help you navigate the country’s legal landscape.
1. Hak Milik (Freehold Ownership)
Hak Milik is the highest form of land ownership in Indonesia, akin to freehold ownership in other countries. It grants the holder full ownership rights indefinitely. However, this privilege is exclusively available to Indonesian citizens. Foreigners are not allowed to hold Hak Milik titles, making it a highly sought-after status for locals.
Key Features:
- Perpetual ownership.
- Can be sold, transferred, or bequeathed.
- Only available to Indonesian nationals.
2. Hak Guna Bangunan (Right to Build)
Hak Guna Bangunan (HGB) is a common type of land title that allows individuals or legal entities to construct buildings on state-owned or private land. This title is typically valid for 30 years and can be extended for an additional 20 years.
Key Features:
- Suitable for both Indonesians and foreigners.
- Valid for up to 50 years (30 years initial, 20 years extension).
- Can be sold, transferred, or inherited.
3. Hak Pakai (Right to Use)
Hak Pakai grants the holder the right to use state-owned or private land for a specific purpose, such as residential or commercial use. This title is available for both Indonesian citizens and foreigners, with a validity of up to 25 years, extendable for another 20 years.
Key Features:
- Available to foreigners.
- Valid for up to 45 years (25 years initial, 20 years extension).
- Restricted to specific purposes.
4. Hak Guna Usaha (Right to Cultivate)
Hak Guna Usaha (HGU) is designed for agricultural, plantation, or fishery activities. It allows the holder to use state-owned land for a period of up to 35 years, which can be extended for another 25 years. Both Indonesian individuals and legal entities can obtain this title.
Key Features:
- Focused on agricultural and related activities.
- Valid for up to 60 years (35 years initial, 25 years extension).
- Available to Indonesians and foreign-owned companies.
5. Hak Pengelolaan (Right to Manage)
Hak Pengelolaan is a right granted by the government to a legal entity to manage state-owned land. This right does not transfer ownership but allows the entity to utilize the land for a specified purpose, such as development or commercial projects.
Key Features:
- Grants management rights, not ownership.
- Typically given to government bodies, state-owned enterprises, or private companies.
- Used for large-scale projects.
6. Strata Title
Strata Title is a relatively new concept in Indonesia, introduced to accommodate the growing demand for apartment and condominium ownership. It allows individuals to own a specific unit within a multi-story building while sharing ownership of common areas.
Key Features:
- Suitable for apartment and condominium ownership.
- Unit ownership plus shared common areas.
- Available to both Indonesians and foreigners.
7. Hak Tanggungan (Mortgage Right)
Hak Tanggungan is a security right attached to immovable property, such as land or buildings, to secure a loan or other obligations. It ensures that the lender has a claim over the property if the borrower defaults on the loan.
Key Features:
- Used as collateral for loans.
- Ensures lender’s claim over property.
- Applicable to all types of land ownership.
Indonesian Sponsorship: Facilitating Foreign Ownership
Navigating property and business ownership in Indonesia as a foreigner can be complex due to legal restrictions. However, Indonesian sponsorship can provide a pathway for foreigners to invest and operate businesses in the country. Here’s a look at how this works:
What is Indonesian Sponsorship?
Indonesian sponsorship involves partnering with an Indonesian citizen or a local entity to facilitate foreign investments and operations. This arrangement can help foreigners comply with local regulations and gain access to ownership opportunities that might otherwise be restricted.
Key Features:
- Enables foreign investment and business operations.
- Provides a legal framework for foreign ownership under local partnerships.
- Ensures compliance with Indonesian regulations.
Types of Sponsorship Arrangements:
- Nominee Arrangements: A local Indonesian acts as a nominee, holding the property or business title on behalf of the foreign investor. While this provides a workaround for ownership restrictions, it requires a high level of trust and legal safeguards to protect the foreign investor’s interests.
- Joint Ventures: Foreign investors can enter into joint ventures with Indonesian entities, sharing ownership and management responsibilities. This is common in sectors where full foreign ownership is not permitted.
- Foreign-Owned Limited Liability Companies (PT PMA): Establishing a PT PMA allows foreigners to own and operate businesses in Indonesia. This structure requires Indonesian sponsorship to comply with investment regulations, but it offers more control and ownership rights compared to nominee arrangements.
Conclusion
Understanding the various types of ownership in Indonesia is essential for anyone looking to invest in property or start a business in the country. Each type of ownership comes with its own set of rules, benefits, and limitations. Whether you are an Indonesian citizen or a foreigner, it is crucial to navigate these legal structures carefully to ensure compliance and maximize the benefits of your investment.
For foreigners, Indonesian sponsorship offers a viable pathway to investment and ownership in the country. However, it is essential to consult with a legal expert or property consultant familiar with Indonesian laws to guide you through the process and help you make informed decisions.
International Surf Properties has a list of highly competent legal professionals that can help you.
Choose Your Dream Property
Now that you have a better understanding of how to hold ownership in Indonesia, lets take a look at some of your options.
Simeulue Surf Lodges is a beautiful property. It is a successful Indonesian surf retreat situated in a small sheltered bay on the west coast of the island. The resort is close to a small beach, blue water, beautiful reefs and a lot of palm trees. The resort is also right in front of the best surf break you will find on Simeulue! 100 meters from your door, Dylans, a powerful, hollow right-hander, NON crowded! Surf from dawn till dusk and walk back to the resort within 1 minute!
Moon Beach, MBSR, is only 10 minutes by car from Sinabang Airport, 20 minutes from the main shopping town of Sinabang and is centrally located for fast access to all the waves on Simeulue and surrounding Islands. Simeulue has the longest fetch of all the Indonesian Islands. This unique positioning means it catches swells from the West that originate around Africa and Madagascar.
Telo Islands Aquatic Playground The Telo Islands or Pulau-Pulau Batu as its official name is strategically situated between Nias to the North and the Mentawais to the South. This amazing property is situated 25 minutes from the main town of Telo and the airport sits in the lee of Sipika Island. Boasting a year-round flat water anchorage straight out the front, world-class surf close by, a huge lagoon, and coral gardens providing world-class SUPing, snorkeling, and spearfishing.
Boutique Beach Bungalows, Leleu, which means Jungle in the Mentawai dialect, is perfectly situated on one of the smaller islands in the central Mentawai chain off the west coast of Sumatra. There is nothing out of place in the design of the property. The guest bungalows are tastefully designed with perfect views of the pristine Indian Ocean and surrounding islands.
To see more properties available see the full lineup here:
https://www.internationalsurfproperties.com/country/indonesia
