• Buying Property in Indonesia: The Definitive Guide

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    Indonesia is often overshadowed by neighboring countries like Malaysia and India in the media. Being Southeast Asia’s richest and biggest country in terms of population, it’s a bit undeserved.

    Sure, Indonesia is set to become a new powerhouse and many manufacturing operations move here. Still, many foreigners have looked elsewhere as foreign property ownership regulations can be both vague and unfavorable.

    There are signs that the government tries to increase foreign investment, something that will be needed to be competitive with its neighboring countries in the coming decade.

    If Indonesia decides to change its property ownership regulations, the market is set to boom. Before you buy property, it’s important that you get your feet wet and learn about the market, property prices, taxes, and more.

    In this article, you’ll learn the following:

    Can foreigners buy property in Indonesia?

    Indonesia has taken small steps to open up its real estate market to foreigners.

    Still, you’re not capable of buying and owning freehold property as a foreigner. Not surprisingly, this has made Indonesia a less desirable choice for overseas investors.

    Even if you can’t own property on a freehold basis (including condo units), you can acquire different titles allowing you to either lease, use, or build physical structures on the property.

    I will explain more about the different titles later in this article.

    What kind of property can foreigners buy in Indonesia?

    For the time being, you can get a right-to-use, right-to-build, or a right-to-lease title for the following property types:

    • Houses that aren’t subsidized by the government
    • Apartments with strata titles
    • Vacant land (you can build a house on the land if you get the right agreements in place with the title owner)

    As you can see, ownership regulations are stricter compared to a majority of its neighboring countries, like the Philippines and Thailand.

    Here, you can at least own condo units and physical structures, such as villas, on a freehold basis. In addition, you don’t need to be a resident to own property, and it’s easier to get hold of long term visas.

    Fortunately, Indonesia’s government understands the problems and will have no other choice than to change the regulations in the coming decade.

    Can foreigners buy land in Indonesia?


    At this point, it probably doesn’t come as a surprise that foreigners cannot buy land in Indonesia.

    This is the standard in Southeast Asia where Malaysia is the only exception (I don’t count Singapore as it’s practically impossible to buy land unless you’re a local citizen or permanent resident).

    Still, some foreigners buy land through contractual setups, often referred to as nominee structures. Simply put, they let an Indonesian citizen hold the title for them.

    Buying property through nominee structures is not recommended and there are a couple of other options you should have a look at instead. First of all, let’s list all the options you have when acquiring land.

    1. Buying land with the help of an Indonesian nominee

    The first option you have is to buy land with the help of a local nominee, might it be a friend, your wife, or any other Indonesian citizen. As mentioned, this has been a common choice among foreigners, especially for buyers in Bali. However, you’ll not be legally protected and there are many risks involved.

    The first step when buying real estate with the help of a nominee is to transfer the plot of land from the seller to your Indonesian nominee.

    In that case, the following agreements should be made with your local nominee.

    Loan agreement:

    The loan agreement will state that you’ve lent money to the Indonesian nominee that buys the property.

    Power of attorney:

    The power of attorney will give you the right to mortgage, sell, or lease the property.

    Permanent right of use agreement:

    This agreement will give you the right to use and occupy the land.

    2. Buying property with a PMA company

    You can get a right-to-use title by opening a PMA company (Penanaman Model Asing Company), that’s registered in the category foreign direct investments (FDI).

    This might sound easier than it is as you can’t simply open a PMA company and use it as a gateway to the Indonesian property market. To open a PMA, you need to provide a business plan (this is the standard in most countries, including Hong Kong).

    You also need to work actively in Indonesia and deposit money into a local Indonesian bank account. Even if you need to walk the extra mile, opening a PMA company is the preferred choice as you’ll be more protected.

    What are the benefits of buying real estate with a PMA company?

    Owning property through a PMA company is superior to using local nominee structures and will protect you significantly more.

    Some of the benefits of buying real estate with a PMA company instead of using local nominee structures are:

    • You’ll be protected by internationally recognized contracts (commonwealth law)
    • The Indonesian Investment Coordinating Board (BKPM) will regulate, check, and audit the entity
    • You’ll have a verifiable tax number (NPWP)
    • Dispute resolutions can be made in international courts

    3. Leasing property in Indonesia

    As explained above, you can lease property by acquiring a property with a Hak Sewa title.

    Villas, condos, and apartments can all be leased with Hak Sewa titles.

    The leasehold period is 25 years, sometimes with a possibility for extension. You should stipulate this in the contract in that case.

    Land titles in Indonesia


    Indonesia has four common land titles that are covered in the Basic Agrarian Law from 1960. Let’s have a look at each one of them and which options are available to foreigners.

    Hak Milik (HM)

    Hak Milik is a freehold title and only available to Indonesian citizens. This title gives you the right to use your land in any way, but you can’t capitalize on the natural resources under the land.

    As an owner of a Hak Milik title, you can sell the title, exchange it, or use it as a mortgage.

    Hak Pakai (HP)

    Hak Pakai is the ‘right-to-use’ title and can be received from a person who owns the Hak Milik. The lease term is set for 25 years and can be renewed for a maximum period of 80 years.

    Worth mentioning: if you get hold of a Hak Pakai as an individual (not a company), you need to reside in Indonesia, or have Indonesia as your domicile.

    In this case, you need to apply for a KITAP (permanent stay permit) or a KITAS (temporary/limited stay permit) to keep the title.

    Hak Pakai is one of the strongest titles and you’re allowed to sell and transfer the title to another person who’s eligible to own the title in Indonesia.

    Hak Sewa (HS)

    If you manage to get a Hak Sewa, you’re allowed to use the buildings or land that’s owned by a person who holds any of the above-mentioned titles.

    You can’t register a Hak Sewa title at the land registry, hence it doesn’t bring any certificate.

    As mentioned, the leasehold period is set to 25 years, sometimes with a possibility for extension.

    Hak Guna Bangunan (HGB)


    Hak Guna Bangunan is a ‘right-to-build’ title. The title is only available to Indonesian citizens or companies that are incorporated in Indonesia. This includes PMA companies that fall under the category ‘foreign direct investment’.

    HGB’s are valid for a period of 30 years but can be extended with an additional 20 years.

    The main difference between Hak Pakai and Hak Guna Bangunan are:

    • You can get a Hak Pakai title as an individual, but Hak Guna Bangunan requires that you open a PMA company
    • You can’t mortgage the Hak Pakai title, which is possible with a Hak Guna Bangunan title
    What happens if I decide to leave Indonesia and own property as an individual?

    You need to give up your right-to-use title or transfer it to another person, that’s eligible to take over the ownership.

    You need to start the process at least one year before leaving Indonesia.

    Indonesia’s property market

    Indonesia has one of the most promising real estate markets in Southeast Asia, but needs to get some things right first.

    Unfavorable ownership regulations have left foreign investors on the sideline, even if prices for luxury property increased significantly some years ago.

    Indonesia definitely draws my attention as:

    • It’s set to grow much in the coming years and has a big consumer market
    • It’s the richest country in Southeast Asia
    • The mortgage penetration is very low
    • It has the fourth largest population in the world, where 60% are aged below 30

    Investors (including many Chinese) believe that the property market is extremely undervalued and has great growth potentials. Kingland Avenue predicts capital appreciations of 10-25% a year if you buy now and sell in the coming years.

    If the Indonesian government can introduce more transparent and favorable ownership regulations, the market is set to boom, especially in its capital Jakarta.

    Property prices in Indonesia


    Jakarta has some of the lowest property prices in Asia and even outperforms places like Phnom Penh, Cambodia.

    Prices average at USD 2,041 per square meter in the central parts of Jakarta, while prices average at USD 1,017 per square meter in suburban areas.

    With prices being at the bottom, Indonesia is suitable for long-term investments and we’ll probably see steady price increases in the coming years.

    Having a young urbanizing population, an increasing middle class, and a low mortgage penetration, the demand and prices will most likely continue upwards.

    Rental yields in Indonesia

    Indonesia has provided some of the best rental yields in Asia in the past, averaging at 8% from 2006-2016.

    Yields started to drop after 2016 and down to 5-6% according to Savills and DBS.

    The luxury segment still performs very well with yields averaging at 8%. This is unusual as yields tend to be lower for luxury property in other countries.

    With the new MRT to be launched in 2019, it will be truly interesting to see how the market will change in terms of yields. Maybe it will even surpass Vietnam and reclaim the first spot.

    Property taxes

    Before you buy real estate, it’s important that you know taxes that apply and how high these are.

    For example, the governments in Singapore and Hong Kong have introduced buyer’s stamp duties ranging between 20-30%. Thus, property taxes can determine whether a country is a no-go.

    Below I’ve listed taxes you need to pay when buying, holding, and selling real estate in Indonesia.

    When buying property

    Let’s have a look at the taxes you need to pay when buying real estate.

    Transfer tax:

    The transfer tax is set to 5% and paid by the buyer.

    Sale and purchase of land deed:

    The same as for the Philippines, a notary needs to witness all property transactions. The fee is generally 1% of the purchase price.

    Legal fee:

    The legal fee is set to 1%.

    Registration fee:

    The registration fee is 0.2%.

    Luxury tax:

    If you buy a house that’s worth RP 20 billion (USD 1.5 million), or an apartment worth RP 10 billion (USD 750,000), you need to pay a hefty luxury tax of 20%.

    However, the government is currently planning to increase the threshold to RP 30 billion, to stimulate the real estate market.

    When holding property

    You’re also required to pay taxes during the time you hold the property.

    Let’s have a look.

    Withholding tax:

    The withholding tax is set to 20%.

    Annual property tax:

    Property tax increases progressively, depending on the value of the property:

    Value up to RP 200 million (USD 15.000)
    = 0.01%

    Value between RP 200 million – 2 billion (USD 15.000 – 150.000)
    = 0.10%

    Value between RP 2 billion – 10 billion (USD 150.000 – 1.5 million)
    = 0.20%

    Value above RP 10 billion (USD 1.5 million)
    = 0.30%

    When selling property

    Below I’ve listed the taxes to be paid when selling property.

    Land and building tax:

    A land and building tax of 5% is paid by the seller. However, for transfers of regular apartments and houses, the rate is 1%.

    Luxury tax:

    The tax is set to 5% and paid by the seller. The government has plans to reduce the tax to 1% to boost the property market.

    Capital gains tax:

    The capital gains tax is surprisingly high and set to 20%.

    Commissions for real estate agents

    Agents normally pocket a commission of 5% of the sales price.

    Best places to buy real estate in Indonesia


    Indonesia is a big country, both in terms of land area and population. Bali and Jakarta are the two most frequently mentioned, but there are some other places you should definitely check.

    Let’s have a look at some of the most popular and most promising places.


    Bali is one of the most visited resort islands in the world and the place where most people look for lifestyle investments in Indonesia. When compared to other resort areas in the region, like Boracay, Bali is cleaner and more family-friendly.

    Prices have increased immensely since a decade back. In fact, Bali has been one of the best performers in the world, in terms of price appreciations.

    Where should I invest in Bali?

    Interesting areas to invest in property in the coming decade include:

    • Nusa Lembongan Island
    • Lombok and the Gili Islands (including Trawangan and Gili Meno)
    • Tanah Lot, and other areas on the coast further north



    Jakarta is the capital with a population of around 30 million people. It’s the financial center and has a breathtaking skyline, something that’s unknown to many foreigners.

    We see new skyscrapers and condos popping up literally everywhere. Leaving this city out of the list would be a no brainer.

    Jakarta is divided into five administrative cities that are in turn divided into smaller districts. The administrative cities are:

    • Central Jakarta
    • West Jakarta
    • East Jakarta
    • North Jakarta
    • South Jakarta

    Jakarta has long suffered from not having an MRT. Previously, this resulted in foreigners and locals buying property within or close to the Central Business District (CBD), as the city often experiences serious traffic congestion.

    However, with the new MRT system completed in 2019, investments will change and much construction is planned in North Jakarta, for example.


    Surabaya is the second biggest city in Indonesia with a population of around 2 million people.

    Similar to Malacca in Malaysia, it was previously a well-known trading hub. Hence, much commercial activity is still going on here.

    The city has even started to outperform Jakarta in terms of economic growth and is one of the top five destinations to turn your focus to in Asia, according to analysts.

    Being one of the biggest cities in Java, you’ll find cheaper real estate in Surabaya compared to Jakarta.


    Another interesting city is Bekasi, which currently receives much investment and has much commercial activity going on. Bekasi is located East of Jakarta, on Java island.

    Thanks to its proximity and easy access to Jakarta, many people decide to reside in Bekasi while working in Jakarta.

    If you look for long-term investments, you should definitely have a look at this city.


    Medan is the fourth-largest city and located in Sumatra.

    The city was much affected during colonialism and was a hub for traders and manufacturers. From here, they exported commodities such as rubber, coffee, tea, and tobacco.

    Nowadays, Medan is still one of the most important cities from a commercial point of view and gets much attention from media and investors.

    Thanks to its proximity to Singapore and Malaysia, the city is said to have one of the most promising property markets outside of Java.

    New shopping malls, condos, and hotels can be seen popping up in many places.

    Except for its history in trade and current economic upswing, Medan also offers a great nature and quality of life.


    Indonesia is the most populous and the richest country in Southeast Asia. The country is set to grow much in the coming years and has many promising features.

    First of all, it has a young population that’s quickly urbanizing. With increased wealth, we’ll see an increased demand for property in the bigger cities. In addition, the mortgage penetration is low and property prices have hit the bottom.

    Still, foreign property ownership regulations are not favourable when comparing to neighbouring countries, like Malaysia, Thailand, and the Philippines.

    This is one of the main reasons why investors have been standing on the sideline, waiting eagerly for the government to relax on regulations.

    Indonesia has great potentials for sure and will undoubtedly introduce new ownership in the coming decade. We’ve already seen amendments to its high luxury taxes.

    Want to learn more about real estate in Indonesia? Read these guides:

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  • 7 Responses to “Buying Property in Indonesia: The Definitive Guide

    1. Priyanka Patel at 12:39 pm

      Hi Marcus, Indonesia is truly an amazing place and its my dream to invest in one of the property. Me along with my husband are in plans to buy one beautiful home for us and I am glad I came across this informative piece of information. This article will definitely help us a lot in home buying process.

      1. Marcus Sohlberg at 3:53 am

        Hi Priyanka,

        Thanks a lot for your comment!

    2. Liz at 4:37 am

      We are exploring the posibility of buying land and builing in west java and need a reputable legal team to guide us through the process. I think we need to set up a pma.help

      1. Marcus Sohlberg at 8:13 am

        Hi Liz,

        Please send us an email then we’ll look into this.

    3. subba at 8:15 pm

      We are plannig to buy land in new capital region of Indonesia. Need best legal team to help in setting up a PMA and real estate company to identify the righh land and help us buy land

      1. Marcus Sohlberg at 11:23 am

        Hi Subba,

        Please send this request through the form above – “Fill out the form to get in touch with a real estate agent”

    4. Ernest Yeap at 2:29 pm

      Hi there,

      If I had an Indonesian wife and I am a foreigner, can I still purchase a low priced house in Indonesia under my wife’s name? Thanks.

      Ernest Yeap

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