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Land and Property Ownership Rights in Indonesia – 3E Accounting

It’s important to know your land and property ownership rights in Indonesia before investing, says 3E Accounting.

Indonesia has undoubtedly opened up towards foreign investment, especially in the real estate sector. Knowing your land and property ownership rights in Indonesia can go a long way towards easing compliance issues. Not only is it a lucrative investment opportunity, but Indonesia is a fabulous place to live in.

 

Applicable Statutes and Regulations

The governing statute is Law Number 5 of 1960 on Basic Regulation of Agrarian Principles or UUPA. This Act lays out the rules and regulations applicable to citizens and foreigners. It needs to be read in accordance with Ministerial Regulation Number 29 of 2016, which governs the criteria for foreign investors’ land ownership and rights.

Foreign investors are advised to set up a limited liability company such as the PT PMA when considering real estate investment. They must have a residence permit, KITAS or KITAP. The requirements can be a bit confusing, and it is continually changing. Engaging business solution firms such as 3E Accounting will ensure proper KITAP and compliance.

An excellent title to consider for investment purposes, especially for foreign investors, is the Right Of title. These lands are either controlled by the State or freehold titles owned by citizens and consist of two types:

Hak Guna Usaha or Right of Exploitation

State-controlled land that gives the right to cultivate a land area of five hectares for livestock, fisheries, or agriculture. It is leased for 25 or 35 years with an option to renew the lease for another 25 years.

Hak Guna Bangunan or Right of Building

The closest a foreign investor can come to having a freehold title. This title to State-controlled land provides a right to build on the land and is leased for 30 years with an option to renew for another 20 years.

Hak Pakai or Right of Use

This is a long-term lease and has several convoluted conditions on usage and the lease term. It applies to both State-controlled land and freehold land owned by citizens. The right can be transferred to, amongst others, citizens, domiciled foreigners, organizations, etc.

Hak Sewa or Right of Leasehold

An outright lease of the land, which is freehold title owned by citizens. Foreign investment is allowed under Article 45 UUPA.

The best type of ownership or title is always outright, which in this case is known as Hak Milik or a Freehold title. This type of title can only be owned by an Indonesian citizen, and Article 21 UUPA prohibits foreigners from such ownership. A Hak Milik entitles owners to do as they wish with the land but with a caveat. They can sell, exchange, or mortgage the land, but their use of natural resources beneath the land is limited by statute.

 

Landing the Right Partnership

Investors may find numerous land and property ownership rights in Indonesia quite confusing. It is essential to engage the right partners to help make sense of opaque laws and regulations. 3E Accounting offers specialized expertise that comes from a proven track record of success. We set the standards with customizable solutions that will take care of all your business needs.

Contact 3E Accounting today and let our professional team handle all your real estate and business matters.