Understanding the Legal Rights, Restrictions, and Requirements for Foreign Property Ownership in Indonesia
Indonesia is an attractive destination for foreigners who wish to live, invest, or conduct business. Bali, Jakarta, and other regions are particularly popular. However, foreigners should understand that property ownership in Indonesia is not as straightforward as it is for Indonesian citizens.
So, can a foreigner own property in Indonesia?
Yes, but only subject to certain legal requirements, types of rights, and restrictions established under Indonesian law.
1. Foreigners Cannot Own Land under Freehold Title
The basic principles of Indonesian land law are regulated under Law No. 5 of 1960 on Basic Agrarian Regulations (Basic Agrarian Law/UUPA).
Article 21 paragraph (1) of the UUPA provides that only Indonesian citizens may hold Hak Milik (Freehold/Ownership Rights) over land.
Therefore, a foreign national cannot simply purchase land in Indonesia and register it in their own name under Hak Milik.
This distinction is important because the term “property ownership” does not necessarily mean ownership of land under Hak Milik. Indonesian law recognizes several different types of land rights, each with its own legal characteristics and limitations.
2. Foreigners May Own Residential Property under Certain Rights
Although foreigners cannot hold Hak Milik over land, Indonesian regulations provide legal mechanisms allowing foreigners to own residential houses or other forms of housing under specific types of rights.
Government Regulation No. 18 of 2021 regulates Management Rights, Land Rights, Strata Titles, and Land Registration. It also specifically regulates residential houses and housing owned by foreigners.
Article 69 of Government Regulation No. 18 of 2021 provides, in substance, that foreigners who may own residential property are foreigners who possess immigration documents in accordance with the applicable laws and regulations.
Thus, a foreigner does not obtain Hak Milik over the underlying land. Instead, ownership or control of the residential property must be structured through a form of right that is legally permitted under Indonesian law.
3. What Types of Property Can Foreigners Own?
Government Regulation No. 18 of 2021 provides several mechanisms for foreigners to own or control residential property.
For landed houses, among the possible legal structures are houses standing on:
- Hak Pakai (Right of Use);
- Hak Pakai over Hak Milik, based on a Right of Use agreement executed through a PPAT deed; or
- Hak Pakai over Hak Pengelolaan (Management Rights), based on an agreement concerning the utilization of the land.
For strata-title units/apartments, foreigners may also own certain strata-title units constructed on land with specific types of land rights, subject to the requirements established by Indonesian law.
Therefore, foreigners do not acquire Freehold Ownership (Hak Milik) over the land, but may acquire rights to residential property through legally recognized forms of land or property rights.
4. Foreign Property Ownership Is Subject to Restrictions
Ownership of residential property by foreigners is not unlimited.
Article 72 of Government Regulation No. 18 of 2021 provides that such ownership is subject to certain limitations, including:
- Minimum property price;
- Maximum land area;
- Number of land parcels or strata-title units; and
- The intended use of the property as a residence or dwelling.
Further implementing provisions are regulated by the relevant ministerial regulations.
For this reason, before entering into a property transaction, foreigners should verify whether the property complies with the applicable requirements, including its land title, land area, permitted use, immigration documents, and other administrative requirements.
5. What About Property for Business or Investment?
This issue must be distinguished from the ownership of a residence.
A foreigner who intends to conduct business or investment activities in Indonesia needs to consider the appropriate investment and corporate structure, including the form of business entity, business licenses, business activities, and the type of land rights that may legally be used.
In other words, purchasing a residence is legally different from acquiring land for business purposes.
The legal structure of the transaction should therefore be determined according to the intended use of the property and the applicable regulations.
6. Avoid Using an Indonesian “Nominee” or Borrowed Name
One practice that should be avoided is the nominee arrangement, commonly referred to as a “borrowed name” arrangement.
This occurs when property is formally registered under the name of an Indonesian citizen, while the actual purchase, control, or beneficial interest belongs to a foreigner through a separate private agreement.
Such arrangements can create serious legal risks because they may circumvent the legal restrictions on land ownership by foreigners.
The UUPA establishes restrictions on foreign ownership of Hak Milik and prohibits the transfer of Hak Milik to foreign nationals.
Therefore, property transactions should be structured transparently, lawfully, and in accordance with the type of land right permitted under Indonesian law, with the relevant legal documents executed by the authorized officials.
7. The Importance of Legal Due Diligence
Before purchasing property in Indonesia, foreigners should conduct proper legal due diligence.
The following matters should be examined, among others:
- The type and status of the land right;
- Land certificate and registration;
- The identity and legal authority of the seller;
- Land-use compliance;
- Zoning and spatial planning;
- Building legality and permits;
- Tax obligations;
- Existing disputes or encumbrances;
- Requirements concerning Hak Pakai or other applicable rights;
- The buyer's immigration documents; and
- The legal mechanism for transferring or establishing the relevant rights.
Proper legal due diligence provides greater legal certainty and helps minimize the risk of disputes in the future.
Legal Basis
The principal legal regulations relevant to foreign property ownership in Indonesia include:
1. Law No. 5 of 1960 on Basic Agrarian Regulations (UUPA)
In particular, Articles 20 and 21 concerning Hak Milik (Freehold/Ownership Rights) and restrictions on ownership by foreign nationals.
2. Government Regulation No. 18 of 2021
Government Regulation No. 18 of 2021 concerning Management Rights, Land Rights, Strata Titles, and Land Registration, particularly Articles 69 to 73 concerning residential houses and housing owned by foreigners.
3. Minister of Agrarian Affairs and Spatial Planning/Head of the National Land Agency Regulation No. 18 of 2021
This regulation governs procedures for the determination of Management Rights and Land Rights.
Important note: Certain older regulations concerning foreign ownership of residential property, including Government Regulation No. 103 of 2015 and Minister of Agrarian Affairs and Spatial Planning/Head of the National Land Agency Regulation No. 29 of 2016, have been revoked and replaced by newer regulations.