Buying real estate in Indonesia as a foreigner?

We've created a guide to help you avoid pitfalls, save time, and make the best long-term investment possible.

Buying property in Indonesia as a foreigner: a full guide

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buying property foreigner Indonesia

Everything you need to know is included in our Indonesia Property Pack

Indonesia is a favored destination among foreigners seeking real estate investment opportunities. With its breathtaking landscapes, rich cultural heritage, and warm hospitality, it's no wonder people are drawn to this country.

However, navigating the process of buying property in a foreign land can be complex, particularly when it comes to understanding the local laws and regulations.

That's where this guide comes in handy! We're here to help foreign buyers easily grasp how the property market operates in Indonesia. Our aim is to provide you with all the essential information in a clear and straightforward manner.

Also, for a more in-depth analysis, you can check our property pack for Indonesia.

Can you purchase and own a property in Indonesia as a foreigner?

If you are American, we have a dedicated blog post regarding the property buying and owning process in Indonesia for US citizens.

Foreigners interested in purchasing real estate in Indonesia face a unique set of regulations and limitations, which differ significantly from those applied to Indonesian citizens.

Understanding these rules is crucial to navigate the process successfully.

Firstly, it's important to note that foreigners are not allowed to own land in Indonesia. This is a fundamental difference from local buyers. Instead, foreigners can acquire certain rights over property, but these rights do not equate to full ownership as understood in many other countries.

The most common way for a foreigner to invest in Indonesian real estate is through a leasehold arrangement. This allows you to lease the property for a long period, typically up to 25 years, which can be extended.

During the lease term, you have the right to use and benefit from the property, but you do not own the land itself.

Another option available is the right to use (Hak Pakai). This right is often used for residential purposes and is initially granted for up to 25 years, with the possibility of extension and renewal.

It's a step closer to ownership compared to leasehold but still falls short of the full ownership rights enjoyed by Indonesian citizens.

Regarding nationality, Indonesia does not generally discriminate between different foreign nationalities in terms of real estate acquisition.

However, certain bilateral agreements or specific circumstances might lead to variations in how these regulations are applied to citizens of different countries.

Residency is not a strict requirement for purchasing property in Indonesia, but having a connection to the country, like a work permit or a long-term visa, can simplify the process. It's worth noting that tourist visas typically do not suffice for this purpose.

Regarding government authorization, while you don't need specific permission to enter into a leasehold or Hak Pakai agreement, all property transactions must be registered with the relevant local authorities. This registration process ensures legal recognition of your rights over the property.

There isn't a universal minimum investment amount set for foreign property purchases in Indonesia.

Can you become a resident in Indonesia by buying and owning a property?

Indonesia does not currently offer a direct residency-by-investment program linked to real estate purchases.

This means that buying property in Indonesia does not automatically qualify you for residency, unlike some other countries that offer such schemes.

However, there are certain pathways to residency that can be explored, although they are not directly tied to real estate investments.

If you're interested in residing in Indonesia, there are several types of visas and permits available, each with its own set of requirements and benefits.

The most common are work visas, retirement visas, and family reunification visas. These visas allow for temporary residence in Indonesia and can be a stepping stone towards a more permanent arrangement.

For retirees, Indonesia offers a retirement visa. This visa is available to individuals over a certain age (usually 55 years and above) from certain countries.

To qualify, you need to meet specific financial criteria, including a minimum pension income. While owning property isn't a requirement for this visa, having a lease agreement can help demonstrate your commitment to living in Indonesia.

Work visas, on the other hand, are tied to employment in Indonesia. If you secure a job with an Indonesian company, your employer can sponsor your work visa. This type of visa also allows for temporary residence but is tied to your employment status.

The concept of permanent residency in Indonesia is different from what you might find in other countries. It usually requires an extended period of continuous temporary residency before you become eligible.

Permanent residency is typically not granted on the basis of property investment alone.

As for citizenship, obtaining Indonesian citizenship is a separate and more complex process. Residency, even permanent residency, does not automatically lead to citizenship.

There are specific requirements for citizenship, including proficiency in the Indonesian language, a certain period of continuous residence, and an understanding of Indonesian culture and society.

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Market indicators

You can find fresh and updated data in our pack of documents related to the real estate market in Indonesia.

If we look at the the GDP per capita indicator, it seems that Indonesian people have become 8.9% richer throughout the past 5 years.

With the population becoming wealthier, there is a likelihood of increased demand for real estate, potentially leading to higher prices in the future.

Looking at the data reported by Numbeo, we can see that rental properties in Indonesia offer gross rental yields between 3.0% and 5.7%.

While they may not provide significant profitability, these moderate yields offer stability and a steady income stream over time.

To know more, you can also read our dedicated article: is it a good time to buy a property in Indonesia?

Daily life of an expat

Living as an expat in Indonesia can be a very rewarding experience, as the country offers a wide range of attractions and activities.

The culture is rich and diverse, and the locals are very welcoming and friendly. The country is also known for its beautiful beaches, lush jungles, and vibrant cities. For those looking to experience a different way of life, Indonesia is a great place to settle down.

The cost of living in Indonesia is relatively low, making it a very attractive option for expats. The country is also known for its excellent healthcare and education systems, making it an ideal destination for families. Expats can also benefit from a wide range of job opportunities, as the Indonesian economy is growing quickly.

In terms of safety, Indonesia is generally considered to be a safe place to live. The government is committed to providing a safe and secure environment for its citizens and visitors. The crime rate is relatively low, and the country is generally peaceful.

Overall, living as an expat in Indonesia can be an incredibly rewarding experience. The country has a lot to offer in terms of culture, lifestyle, and job opportunities. With its low cost of living and excellent healthcare and education systems, it is an ideal destination for those looking to start a new life abroad.

What are the best places to purchase a property in Indonesia?

This table summarizes some of the best places to buy a property in Indonesia.

City / Region Population Average Price per sqm (IDR) Strengths
Jakarta ≈ 10 million 20,000,000 - 50,000,000 Capital city, economic center, cultural diversity, modern amenities
Bali ≈ 4.3 million 10,000,000 - 30,000,000 Tropical paradise, tourism hotspot, stunning beaches, vibrant culture
Bandung ≈ 2.7 million 5,000,000 - 15,000,000 Education hub, cool climate, culinary delights, creative industry
Surabaya ≈ 3 million 5,000,000 - 15,000,000 Commercial and industrial center, diverse economy, bustling city
Yogyakarta ≈ 400,000 10,000,000 - 30,000,000 Cultural capital, historic sites, arts and crafts, university town
Medan ≈ 2.5 million 5,000,000 - 15,000,000 Gateway to North Sumatra, diverse cuisine, cultural attractions
Surakarta (Solo) ≈ 570,000 5,000,000 - 15,000,000 Traditional Javanese culture, historic royal city, batik industry

Do you need a lawyer to buy a property in Indonesia?

When purchasing a property in Indonesia, engaging a local lawyer can be crucial in navigating the legal requirements and ensuring a successful transaction.

One important document they can assist with is the Purchase Agreement (Perjanjian Jual Beli), a legally binding contract between the buyer and seller that outlines the terms and conditions of the sale.

The Indonesian lawyer can also help with conducting a Land Certificate Verification (Verifikasi Sertifikat Tanah) to verify the property's ownership status and identify any potential legal issues or encumbrances.

Moreover, they can guide you through the process of obtaining necessary permits and approvals, such as approval from the local Land Office or relevant authorities.

They will ensure that all applicable taxes and fees, such as the Property Transfer Tax and Notary Fees, are paid correctly and in compliance with Indonesian laws and regulations.

What are the risks when buying real estate in Indonesia?

We've got an article dedicated to the risks associated with purchasing property in Indonesia.

The risks associated with buying a property in Indonesia are primarily related to the legal system.

The legal framework for property ownership in Indonesia is complex, and it is essential to ensure that the property is registered correctly and all legal documents are in order before purchase.

In addition, there is a risk of hidden legal fees, such as the right of first refusal (Hak Guna Bangunan).

Another risk is the potential for disputes with local authorities. In some cases, local authorities may claim ownership of land, and it is important to ensure that any potential property is not subject to such claims.

Finally, there is the potential for environmental issues, such as flooding or landslides, which can be difficult to assess prior to purchase.

real estate Indonesia

Everything you need to know is included in our Indonesia Property Pack

What are the documents needed for a real estate transaction in Indonesia?

When buying a property in Indonesia, the following documents are typically required:

1. Copy of KTP (Identity Card) of Buyer and Seller

2. Copy of NPWP (Tax Identification Number) of Buyer and Seller

3. Copy of Akta Jual Beli (Deed of Sale and Purchase) from Notary

4. Copy of Akta Pendirian Perusahaan (Deed of Establishment of Company) for company buyers

5. Copy of Akta Perubahan (Amendment Deed) for company buyers

6. Copy of Sertifikat Hak Milik (Certificate of Ownership) of the property

7. Copy of PBB (Tax Certificate of Property) of the property

8. Copy of IMB (Building Permit) of the property

9. Copy of KTP (Identity Card) of the Seller’s spouse for joint ownership

10. Copy of Akta Nikah (Marriage Certificate) for joint ownership

We review each of these documents and tell you how to use them in our property pack for Indonesia.

How do you approach negotiations with individuals from Indonesia?

By considering these tips that align with Indonesian culture, you can navigate the negotiation process more effectively when dealing with property in Indonesia.

Building a personal relationship and establishing trust is essential in Indonesian culture. Take time to engage in friendly conversations and show genuine interest in the seller's background and experiences. Developing a connection based on trust can positively impact the negotiation process.

Respect and politeness are highly valued in Indonesian culture. Maintain a courteous and respectful demeanor throughout the negotiation process. Avoid aggressive or confrontational behavior, as it can hinder progress and damage the relationship.

In Indonesia, relationships and social connections play a significant role in business transactions. Utilize your network to find connections or introductions that can help establish a rapport with the seller. This indirect approach can contribute to a smoother negotiation process.

Take time to understand the local market and property values. Conduct thorough research on the property, its location, and recent comparable sales in the area. Having well-informed knowledge will demonstrate your seriousness as a buyer and provide a basis for negotiation.

Indonesians appreciate the art of negotiation and bargaining. Embrace this cultural aspect and be prepared to engage in a back-and-forth negotiation process. Start with a reasonable offer and expect counteroffers. Remember to remain patient and flexible throughout the negotiation process.

Focus on building a win-win situation. Indonesians value harmony and mutual benefits in business transactions. Look for creative solutions that address the needs and interests of both parties, fostering a cooperative atmosphere and increasing the likelihood of reaching an agreement.

Face-to-face communication is highly valued in Indonesia. Whenever possible, schedule in-person meetings to discuss the property and negotiate terms. This will allow for better understanding and communication, as non-verbal cues and body language are important in Indonesian culture.

Indonesian real estate transactions can involve complex legal processes. It is advisable to seek assistance from a local lawyer or legal expert with experience in property transactions. They can guide you through the legal requirements, help draft or review contracts, and ensure that your interests are protected.

Can foreigners obtain a bank loan in Indonesia?

Foreigners can get property loans in Indonesia, but the eligibility criteria and requirements vary depending on the lender and loan terms.

If you're a foreigner looking to get a property loan in Indonesia, you'll usually need a valid residence permit and meet the specific requirements established by the lenders in the country.

Some banks in Indonesia that can grant mortgages to foreigners include Bank Mandiri, Bank Central Asia (BCA), and Bank Negara Indonesia (BNI).

However, it's worth noting that mortgage rates in Indonesia for a 20-year term range between 8% and 12%. While they are somewhat high, they are still competitive. Look into other countries for potentially better financing options.

What are the taxes related to a property transaction in Indonesia?

Here is a breakdown of taxes related to a property transaction in Indonesia.

Tax Description Calculation Who pays
Value Added Tax (PPN) Tax on the sale of newly built properties 11% of the property sale price Buyer
Rental Income Tax Tax on rental income generated from the property 10% of rental income for residents and 20% for non-residents Owner
Acquisition Tax (BPHTB) Tax imposed on the transfer of property ownership 5% of the property's assessed value or transaction value, whichever is higher Buyer
Income Tax (PPH) Tax on the sale value of the property 2.5% of the property's assessed value or transaction value, whichever is higher Seller
Land and Building Tax (PBB) Annual tax on the ownership of land and buildings A flat rate of 0.5% on the assessed value of the property Owner

What fees are involved in a property transaction in Indonesia?

Below is a simple breakdown of fees for a property transaction in Indonesia.

Fee Description Calculation Who pays
Legal Fee Fees paid to lawyers for legal assistance and document preparation Varies from 0.5% to 1.5% of the property sale price Buyer
Real Estate Agent Fee Fee charged by estate agents for their services Around 5% of the transaction value Seller
Notary Fee Fee for notarial services related to the transfer 1% of the property value or a fixed amount Buyer
Registration Fee Fees for registering the property transfer Around 0.2% of the property value Buyer

Buying real estate in Indonesia can be risky

An increasing number of foreign investors are showing interest in Indonesia. However, 90% of them will make mistakes. Avoid the pitfalls with our comprehensive guide.

buying property foreigner Indonesia