Buying Property in Indonesia as a Foreigner

Further in a continuing series (following Singapore, Malaysia, and the Philippines).

The usual caveats – I’m not a property expert, financial manager, yadda yadda, and I’m not to blame if you buy a property based on one of my articles and something goes wrong! I’m also not a huge expert on Indonesia as a whole (certainly not compared to some other ASEAN countries) – nonetheless, I’m hoping the following will at least give a starting point for anyone interested in the market there. With that said…..

Indonesia has the largest economy in the Southeast Asia region, and it’s made up of over 13,000 islands split into 34 provinces. It has a land area of nearly 2 million square kilometres that supports a population of over 270 million people.

Lying close to the equator, Indonesia has a stable year-round climate that changes only with the monsoon season. It has a robust business economy, is a favourite tourist destination (in certain areas – particularly Bali which has the highest concentration of drunk,rude, foul Aussie ‘bogans’ in the world!), and is home to beaches on the coast as well as vast stretches of native rainforest and abundant wildlife in its mountain regions.

As the fourth-largest populous country in the world, Indonesia’s strong economy, vast consumer market and pulsing tourism offering mean that the country is packed with career and lifestyle options that attract workers, visitors and residents alike.

So you might expect a property market that is booming correspondingly – but that’s not necessarily the case.

Foreigners who legally reside in Indonesia have only been able to purchase property since 2015, and they may only hold it for a limited period of time, generally up to 80 years. It’s not possible for foreigners to purchase land – only to “use” it. In addition, the law has changed a number of times since it was introduced, so it can be confusing to navigate the legislation. You may encounter sellers who aren’t up to date with requirements, or who may try to take advantage of the changes – and this can lead to problems for you down the track.

Tough restrictions still apply in the Indonesian property market. It’s important to familiarise yourself with the complexities of Indonesian property law, and as always, consult a reputable lawyer (if possible, one recommended by other ex-pat’s) before going ahead with any property purchase in a foreign market.

So, what’s the property market like in Indonesia?

Indonesia’s property market went through a boom and subsequent crash in 2013 that hurt a lot of buyers and investors. Since then, the market has stayed relatively flat.

The only exception to this is Bali, which has been the best-performing real estate class (in terms of vacant land appreciation) in the world over the past 10-12 years. Seriously though – unless you’re an investor, avoid Bali (see above)!

2015 saw the change to the law that enabled foreign residents to buy property in Indonesia, which was quickly followed by a number of amendments. The current regulations involve heavy restrictions that have sent many property purchasers to invest in other markets that are easier to negotiate, such as in nearby Malaysia, Thailand or Singapore. The market showed some signs of improvement in 2017, with the first year of growth since 2013. Average prices for strata title apartments in Jakarta, for example, rose by 4.6% to an average of IDS 32.7 million (US$2,289) per square metre, according to Colliers International.

Following this modest growth, and mindful of avoiding another bubble, the Indonesia Central Bank raised interest rates in 2018 and removed the 15% down-payment on mortgages for first-home buyers – but this benefit generally cannot be accessed by foreign residents.

The general consensus is that foreign developers and buyers in Indonesia have been taking a “wait and see” approach to the new environment. Strict regulations and uncertainty about the future have dampened demand.

Many investors believe the market is undervalued relative to price and the general consensus is that the market will remain relatively flat until at least the second half of 2019, after the next general election.

How do foreigners buy property in Indonesia?

Since 2015, foreigners who reside in Indonesia have been permitted to own landed houses (or apartments) for up to 80 years, under the Hak Palai title, which is the “Right-to-use” title. It is important to note that this is NOT a land title. Foreigners may own property, but not land. This means you can have your name on the title of a construction, but you cannot have your name on the title of the land on which it’s built. It’s also important to be aware that if you are a foreigner, you can only buy physical structures (apartments or houses) directly from a developer. The direct second-hand housing market is not open to foreign residents.

There are also fixed minimum values to consider. These can be extremely high, and they are set individually by the region in which the property is located. As a guide, for a house in Jakarta you will need to pay at least 10 billion IDR, which is around USD750,000, and for an apartment the amount is 5 billion IDR.


Zone Landed House
Minimum purchase value
Minimum purchase value
Jakarta IDR 10 billion IDR 5 billion
West Java
IDR 5 billion IDR 2 billion
East Java IDR 5 billion IDR 1.5 billion
Bali IDR 3 billion IDR 2 billion
Central Java
IDR 3 billion IDR 1 billion
North Sumatra
East Kalimantan
South Sulawesi
IDR 2 billion IDR 1 billion
Other Regions IDR 1 billion IDR 750 million

Source: Investor Daily

What kind of title system operates in Indonesia?

There are four basic property titles operating in Indonesia, which are set out in the Basic Agrarian Law of 1960.

Hak Milik is the equivalent of a freehold title

Under this title, a person or company owns the land or a building on the land. They have the right to use land in any way, but is prohibited from using or capitalizing on any natural resources under the land. An owner can sell their title, exchange it, or it as a basis for a mortgage. This kind of title is only available to citizens of Indonesia.

Hak Pakai is a right-to-use title

It means you do not own the land, but you have the right to construct or use residential property that is situated on the land. In order to obtain a Hak Pakai title you must be a resident in Indonesia.

There is an original lease term of 30 years which can be extended twice: once by another period of 30 years and then once again, for an additional period of 20 years. The maximum lease period is capped at 80 years.  After the lease has expired, the property and any enhancements you might have made to it, will revert to the owner.

However, although the Hak Pakai title is not as valuable as a Hak Milik title, it is very strong nonetheless, and you may sell or transfer the title to another eligible person at any time during your lease.  As the years go by, the value of your property will depreciate, because the shortening period of the lease will be less attractive to a prospective buyer.

You can’t use a Hak Pakai title for consideration as equity by a bank, nor can you take out a mortgage for a Hak Pakai property.

Hak Guna Bangunan is a right-to-build title

It’s similar to Hak Pakai, but it is only available to Indonesian citizens or companies incorporated under Indonesian law. This includes those companies known as PMA companies, which fall under the category of foreign investment. It is a kind of conditional corporate ownership, which gives the owner the right to use or construct a building for a certain period of time. The initial lease period is 30 years, with an option to extend for another 20 years, and then another 30 years.

Banks and financial institutions will accept this title for mortgage and security purposes.

Hak Sewa is a right-to-lease title

Any foreigner with a working or residency visa can access this kind of title. With this title you may lease the buildings or land that is owned by a person who has one of the other three kinds of titles. This title cannot be registered at the land registry. The initial lease period is for 25 years and there is the possibility to extend it for another 25 years.

It’s not possible to take out a mortgage against a Hak Sewa title.


What are the costs of property in Indonesia?

As you would expect in a country with such a large land area, property prices vary enormously depending on the desirability of the location and the style of the property in question.

There are large variations even between different areas of the same city, such as Jakarta, as set out in the table below.


Area     Average price (IDR) Average price (USD)
CBD     50,468,454 3,533
South Jakarta     37,959,967 2,657
Non-prime area     24,795,184 1,736
Average     32,702,508 2,289
Source: Colliers International

Take note of new infrastructure developments though, such as the new Mass Rapid Transport (MRT) system that is due for completion. Improved infrastructure like this is likely to boost both property construction and prices in the north of the city.

Other attractive cities are Bekasi, where many people live while working in Jakarta, and Surabaya, the second largest city in Indonesia. You’ll find cheaper property in these city areas.

What is the legal process for buying property in Indonesia?

As I’ve already mentioned above, there are strict requirements for foreign residents who want to purchase property in Indonesia.

These are set out under House Ownership of Foreigners Residing in Indonesia, the regulation signed in 2015 by Indonesia President Joko Widodo.  Since that time there have been a number of amendments.

Buying property under the Hak Palai title:

  • The property can be bought under the Hak Palai title for an initial period of 30 years. This can be extended twice; once by 30 years and then by another 20-year period, for a total of 80 years of potential
  • The property must be purchased directly from the developer
  • The property must be of at least the fixed minimum price according to the region in which it is located
  • The property cannot be sublet to a third-party under any circumstances
  • If a foreign resident leaves the country to reside elsewhere, they must relinquish the Hak Palai title, or transfer it to another person who meets the requirements of property ownership. This must be completed within one year of the foreign resident’s departure from Indonesia.

Buying property under the Hak Guna Bangunan title

It is possible – but not easy – for foreigners to purchase property with this title by using a Penanaman Model Asing (PMA) company. A PMA company can be fully owned by a foreigner, regardless of whether they are a resident or not.

A PMA company is allowed to operate for 30 years after it has been formed. It can choose to extend this period twice: first by another 30 years, and then again by an additional 30 years (as long as it has expanded its operations enough to require additional financial investment).

This period covers almost exactly the time period of the Hak Guna Bangunan (“right-to-build”) title, which enables a company to build or construct land for 30 years, then extended for another 20, and extended again for an additional 30 years.

To establish a PMA company is not a simple task and involves a great deal of administration and paperwork. You will need to fulfil a number of requirements and obligations, including the following:

  • Design and submit a valid and detailed business plan
  • Ensure your company operates in an environment that is beneficial to Indonesia, specifically in terms of foreign skills, employment or environmental benefit
  • Make a cash deposit in an Indonesia bank. This amount is calculated based on the capital employed in the business. The minimum investment amount for a PMA is IDR 10 billion, and the paid-up capital portion is generally around 25% (ie 2.5 billion). In certain capital-intensive industries, the minimum requirement is higher.
  • Demonstrate that the property investment is treated as an asset of the company

You can expect this process to take between three to four months. Once it has been completed you can then start applying for work permits for your foreign directors, limited to three in the first year.

Costs for setting up a PMA company are approximately USD3000 for the administrative and paperwork requirements.

Leasing property under the Hak Sewa title

The Hak Sewa title can be accessed by any foreigner with a working or residency visa. The initial lease period is 25 years and it can be extended for a further 25 years.

For these kinds of transactions, it’s important to work with a lawyer for the transaction and monetary exchange. All transactions must take place at the office of the Indonesian Notary (Pejabat Pembuat Akta Tanah) in the area where the land is located.

Be careful to ensure that any land you are considering is certified and registered at the local land office. Any unregistered land (Adat land) will be owned by the community, and a potential purchase will need to be investigated in order to establish whether it is government or community registered land.

The complete application process of registering a property involves six procedures and takes roughly twenty-two days. Your lawyer will guide you through this process.

Buying Hak Milik property through an Indonesian representative or nominee

Some foreigners choose to use an Indonesian representative who can act as an intermediary to acquire land for the purchaser.

Sometimes this intermediary may be an Indonesian spouse, and at other times it may be a formal contractual agreement between third-parties. Under this arrangement, the owner of the land becomes the representative.

If you are considering a land purchase using this approach, it’s important to finalise three agreements with your representative in order to protect your interests:

  1. Loan Agreement – stating that you as the foreign buyer lent the purchase price to your  Indonesian representative.
  2. Irrevocable Power of Attorney – giving you, the foreign buyer, full authority to sell, lease, mortgage, etc. the land.
  3. Permanent Right of Use Agreement – giving you full rights to the use and occupancy of the land.

What are property taxes like in Indonesia?

First and foremost, be aware that you will not be able to access a mortgage from an Indonesia bank if you have property with a Hak Pakai title. A land title must be Hak Milik or Hak Guna Bangunan in order for a bank to use the title as collateral, and even then, the usual term of a home loan in Indonesia is only for about five years.

If you buy property in Indonesia, you can expect to pay a range of standard fees and charges. In total, budget for an additional 7-8% of the total purchase cost of your property.


Who pays?
Transfer Tax 5% buyer
Sale and Purchase of Land Deed 1% buyer
Legal Fee 0.50% – 1.50% buyer
Registration Fee 0.20% buyer
Land and Building Transfer Duty 5% seller
Real Estate Agent’s Fee 5% seller
Costs paid by buyer 6.70% – 7.70%
Costs paid by seller 10%
See Footnotes
Source: Global Property Guide

Be aware that if you buy a house or apartment that’s worth over IDR 20 billion (around USD 1.5 million), you’ll also need to pay luxury tax of 20% on the full sale price.

Costs of holding property in Indonesia

You’ll be required to pay taxes during the time that you hold the property, in addition to those that you’ll pay at the time of purchase.

  •  Withholding tax is set at 20%
  •  Property tax is levied at different rates, based 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 to 150.000) = 0.10%
    • Value between RP 2 billion – 10 billion (USD 150.000 to 1.5 million) = 0.20%
    • Value above RP 10 billion (USD 1.5 million)                              = 0.30%

Costs of selling property in Indonesia

Expect to pay land and building transfer tax of 5% of your selling price, real estate agent commission of around 5% of the sales value, and a flat rate of 20% for capital gains tax.

What happens to my Indonesian property if I die?

This is a very complex and technical subject, and we strongly recommend that you seek advice from a qualified lawyer with expertise in Indonesian property and inheritance law.

Remember that foreigners cannot own land, so if you will a property to children or another person and they are not an Indonesian citizen, they will need to sell, release or transfer any ownership rights within a year. For example, under the Hak Palai title your children can inherit from you, but the heir must be legally resident in Indonesia in order to keep it – and a Hak Palai property cannot be rented out as an investment vehicle.

If you are married to an Indonesian spouse, Indonesian law considers property to be a joint asset, and there are strict rules governing the way that property or the proceeds of a sale of a property must be divided. These differ depending on whether you have children or not, and the spouse’s family are also entitled to a portion of the assets.

Overall – of the countries I’ve looked at in detail, Indonesia is probably one of the more complicated and difficult property markets for a foreigner to access. Keep in mind though that this is my personal view only, although I doubt I’ll be joining the Aussie bogans and drug traffickers in Bali any time soon.



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