Can Foreigners Own Property in Indonesia? A Practical Legal Guide for Expats, Investors, and Digital Nomads

Table of Contents

The Main Legal Question

Can foreigners legally own property in Indonesia?

Short answer: No, foreigners cannot own land in Indonesia under freehold (Hak Milik) title. However, Indonesian law allows foreigners to legally control, use, and benefit from property through specific land rights and structures, if done correctly and in compliance with Indonesian regulations.

This distinction—ownership vs. legally recognized rights—is the key to understanding property law in Indonesia for foreigners. Many costly mistakes happen because this difference is misunderstood or ignored.

Legal Explanation

Understanding Property Ownership in Indonesia

Indonesia applies a national land law system based on state control over land, not absolute private ownership. All land in Indonesia is ultimately controlled by the state and allocated through legally defined land rights.

For Indonesians, the strongest land right is Hak Milik (Right of Ownership). For foreigners, Indonesian law takes a restrictive but structured approach.

Why Foreigners Cannot Hold Freehold Title

Indonesian land law is designed to:

• Protect national land sovereignty
• Prevent land speculation by non-citizens
• Ensure land remains under Indonesian control

As a result, foreign individuals and foreign legal entities are prohibited from holding Hak Milik. This is not a loophole—it is a core principle of Indonesian land law.

What Foreigners Can Legally Do

While foreigners cannot own land outright, they can legally:

• Own apartments (strata title) under specific conditions
• Hold Right of Use (Hak Pakai) over land or buildings
• Control property through long-term lease agreements
• Acquire property via Indonesian legal entities (e.g., PT PMA) for business use

The legality depends on:

• Immigration status
• Purpose of property use
• Proper land title
• Compliance with administrative and tax obligations

Legal Basis

Below are the key Indonesian laws governing foreign property ownership, with practical explanations.

1. Basic Agrarian Law

Law No. 5 of 1960 on Basic Agrarian Principles
Key Articles:

• Article 21(1): Hak Milik is only for Indonesian citizens
• Article 26(2): Transfer of Hak Milik to foreigners is prohibited and void by law

Practical Meaning:
Foreigners cannot legally hold freehold land. Any attempt—direct or indirect—to register Hak Milik under a foreigner’s name is invalid and can be canceled by the state.

2. Government Regulation on Land Rights

Government Regulation No. 18 of 2021 on Management Rights, Land Rights, Apartment Units, and Land Registration
Key Provisions:

• Article 67: Foreigners may hold Hak Pakai over land or apartment units
• Article 71: Hak Pakai may be extended and renewed

Practical Meaning:
Foreigners may legally use and control property for residential purposes through Right of Use, including renewal rights—making it suitable for long-term residence.

3. Government Regulation on Residential Property for Foreigners

Government Regulation No. 103 of 2015 on Ownership of Residential Houses or Occupancy by Foreigners
Key Provisions:

• Article 1: Foreigners with valid stay permits may own a residence under Hak Pakai
• Article 2: Property must be used as a residence, not for speculation

Practical Meaning:
If you hold a valid Indonesian stay permit (KITAS or KITAP), you can legally own a house or apartment under Hak Pakai, subject to minimum price thresholds.

4. Minister of Agrarian Affairs Regulation

Minister of ATR/BPN Regulation No. 18 of 2021
Key Provisions:

• Defines minimum property prices by region
• Clarifies apartment ownership for foreigners

Practical Meaning:
Foreigners can own strata-title apartments in approved developments, but not low-cost housing.

5. Investment Law (for Business Ownership)

Law No. 25 of 2007 on Investment
Key Articles:

• Article 5: Foreign investors may establish Indonesian legal entities
• Article 8: Protection of foreign investment rights

Practical Meaning:
Foreign-owned companies (PT PMA) may hold land under Hak Guna Bangunan (HGB) or Hak Pakai for business purposes—but not personal residential use.

Types of Property Rights Available to Foreigners

1. Hak Pakai (Right of Use)

• Duration: Up to 30 years
• Extendable and renewable
• Residential or limited commercial use
• Most common and safest option for individuals

2. Apartment Ownership (Strata Title)

• Built on Hak Pakai or HGB land
• Registered under the foreigner’s name
• Subject to regional price limits

3. Long-Term Lease (Sewa)

• Pure contractual right
• No land registration
• Higher legal risk if poorly drafted

4. Ownership via PT PMA

• For business operations only
• Property must support company activities
• Subject to investment licensing rules

Risks and Legal Consequences

1. Nominee Arrangements (High Risk)

Using an Indonesian “nominee” to hold Hak Milik is illegal.
Legal Consequences:

• Agreements may be declared null and void
• Property can be seized
• No legal protection in court

Legal Basis:
Law No. 5 of 1960, Article 26(2)

2. Loss of Stay Permit

Foreigners must maintain valid immigration status.
If your KITAS or KITAP expires:

• You may be required to divest the property
• Failure to comply may result in forced sale

3. Inheritance Issues

Foreign heirs cannot inherit Hak Milik.
If inheritance occurs:

• Property must be sold or converted
• Failure results in state acquisition

4. Zoning and Use Violations

Using residential property for:

• Airbnb
• Commercial rentals
• Office use

may violate zoning laws and lead to:

• Administrative sanctions
• Permit revocation
• Fines

Case Examples

Case 1: Expat Retiree Buying a Villa
John, a U.S. citizen with a KITAP, purchases a villa under Hak Pakai. The land is properly registered, taxes are paid, and the right is renewable.

Result: Legal, secure, and compliant ownership.

Case 2: Nominee Agreement Gone Wrong
Sarah buys land through her Indonesian partner’s name using a private agreement. After a dispute, the partner sells the land.

Result: Sarah has no legal claim. Courts reject nominee agreements.

Case 3: Foreign-Owned Company Property
A U.S. company establishes a PT PMA and buys office space under HGB.

Result: Legal for business use, not for private residence.

What Can Be Done (Practical Solutions)

Option 1: Use Hak Pakai Correctly

• Ensure proper land title
• Register with the Land Office (BPN)
• Maintain valid stay permit

Option 2: Buy a Qualified Apartment

• Check zoning
• Confirm minimum price threshold
• Verify developer permits

Option 3: Long-Term Lease (With Safeguards)

• Use notarized agreements
• Include renewal clauses
• Register lease where possible

Option 4: Establish a PT PMA

• For business-related property
• Comply with investment regulations
• Separate personal and company assets

Option 5: Legal Due Diligence

• Land certificate verification
• Zoning check
• Tax compliance review

Additional Practical Considerations

Taxes and Fees

• Land and Building Acquisition Duty (BPHTB)
• Annual Land and Building Tax (PBB)
• Capital gains tax upon sale

Financing

• Indonesian banks rarely lend to foreigners
• Most purchases are cash-based

Conclusion

Foreigners cannot own land outright in Indonesia, but they can legally and securely control property through recognized land rights and structures. The key is understanding the law, avoiding illegal shortcuts, and choosing the right legal mechanism for your situation.

With proper planning, due diligence, and professional advice, property ownership in Indonesia can be safe, compliant, and commercially viable for foreigners.

FAQ: Can Foreigners Own Property in Indonesia?

Can foreigners own land in Bali?
No. Bali follows the same national land laws. Only Hak Pakai or lease is allowed.

Can a foreigner inherit property in Indonesia?
They may temporarily inherit but must divest or convert the title.

Can I rent out my property as a foreigner?
Only if zoning and permits allow commercial use.

Is Hak Pakai safe long-term?
Yes, if properly registered and renewed.

Can foreigners buy property without a KITAS?
Generally no. A valid stay permit is required.

Is using a nominee ever legal?
No. It is expressly prohibited under Indonesian land law.


Professional Legal Assistance
If you are considering buying, leasing, or investing in property in Indonesia, consult a licensed Indonesian advocate before signing any agreement.
Please refer to the contact details available in the website navigation to obtain professional legal advice tailored to your situation.