Buying real estate in Indonesia?

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Understand the title deed when buying a property in Indonesia

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Exploring property investment in Indonesia is promising. The market offers choices such as tropical villas, beachfront properties, and city apartments with great potential.

However, international buyers may find it challenging to navigate the Indonesian real estate market, particularly when verifying the authenticity and legality of the "Hak Milik," which serves as the official title deed in Indonesia.

We have actually covered this specific document (among others, like the sales contract) in our property pack for Indonesia.

In this article, we will give some insight to ensure a smooth and legally compliant property transaction in Indonesia.

However, please do not forget that this blog post is for informational purposes only and that we are not legal experts. It's always advisable to consult with one. They can indeed thoroughly examine your specific situation and provide you with the most appropriate and tailored advice.

What is the Hak Milik in Indonesia?

Hak Milik, in the context of Indonesian real estate, is a crucial concept to understand, especially if you're looking into property transactions in the country.

Essentially, Hak Milik translates to 'ownership rights' and is the strongest form of property ownership recognized in Indonesia. It's akin to freehold ownership in other legal systems, granting the holder absolute and exclusive rights over the land.

What sets Hak Milik apart from other property documents in Indonesia is its permanence and exclusivity.

Unlike other rights such as Hak Guna Bangunan (HGB) or Hak Pakai, which are more like leasehold rights and typically have time limitations, Hak Milik is perpetual. That means once you have it, the land is yours indefinitely, unless you decide to transfer it or the government requisitions it for public purposes.

The legal rights conferred by Hak Milik are comprehensive. It allows the owner to use, exploit, and even modify the land, subject to Indonesian laws and regulations. You can build on it, farm it, rent it out, or just keep it as an investment.

However, while Hak Milik grants extensive rights, it doesn't allow for certain actions. For instance, you can't use the land in a way that violates zoning laws or environmental regulations.

Also, being a landowner doesn't give you automatic rights to exploit natural resources found on or under the land, like minerals or oil, which are generally controlled by the state.

Now, when it comes to resale and inheritance, Hak Milik offers a high degree of flexibility and security. You can sell, gift, or bequeath the land freely. This security makes it an attractive option for both local and foreign investors.

However, for foreign investors, it's important to note that directly owning Hak Milik land is not straightforward.

Indonesian law restricts land ownership to Indonesian citizens. Foreigners often navigate this through various legal arrangements, like forming a partnership with an Indonesian entity or individual, or opting for different types of property rights like Hak Pakai.

Regarding reliability, Hak Milik is as solid as it gets in Indonesia's property market. It's a legally binding and officially registered document, providing clear proof of ownership. However, as with any property transaction, due diligence is key.

Ensuring that the seller has a legitimate Hak Milik and that there are no disputes or encumbrances on the property is essential.

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How to verify a title deed in Indonesia?

The process

Verifying the authenticity of a Hak Milik, which is the title deed for property ownership in Indonesia, is an essential step in any real estate transaction. Yes, it can certainly be verified, and there are specific ways to do it.

To start with, the primary government body responsible for land registration in Indonesia is the National Land Agency (Badan Pertanahan Nasional, BPN). This agency maintains records of all registered land, including those under Hak Milik.

To verify a Hak Milik, you should approach the local office of the BPN in the area where the property is located. They can provide official confirmation of the title's authenticity and details about the land, such as its size, location, and the registered owner's name.

Notaries and lawyers play a crucial role in this process as well. In Indonesia, property transactions often involve a notary, who is responsible for preparing and authenticating property deeds, including Hak Milik.

Engaging a reputable notary or lawyer can provide an additional layer of verification. They can conduct due diligence, check for any legal encumbrances or disputes on the property, and ensure that the title deed you're dealing with is genuine and legally valid.

Real estate agents can also be helpful, but their role is more about facilitating the buying and selling process rather than legal verification.

While they might assist in gathering documents or setting up meetings, it's important to remember that the legal verification of Hak Milik should be done through official channels like the BPN, notaries, or lawyers.

Regarding identifying red flags and avoiding scams, ensure the person selling the property is the actual owner listed on the Hak Milik. Cross-check their identity card with the name on the title.

Also, look out for discrepancies in property details. The size and boundaries of the land on the title should match the physical property.

Be cautious if the seller is rushing the transaction or is hesitant to provide documents or access to verify information. Always use reputable professionals (lawyers, notaries) for transactions. Avoid shortcuts or under-the-table deals that seem too good to be true.

Remember, thorough due diligence is the key to avoiding scams and ensuring a smooth property transaction in Indonesia.

What to check

Understanding the history of a property in Indonesia, especially when it comes to a Hak Milik (ownership title), is a critical aspect of a real estate transaction.

Accessing, tracing, and interpreting the property's history records helps in making an informed decision and avoiding future complications.

To trace the history of a Hak Milik, you should start with the National Land Agency (Badan Pertanahan Nasional, BPN). They maintain a record of all registered lands and can provide a historical overview of the property.

This includes past ownerships, transactions, and any changes made to the property. Requesting a property history report from the BPN can give you a clear picture of its past.

Understanding the property's past ownerships and transactions is important for several reasons. It helps in identifying any patterns of disputes, frequent changes in ownership, or irregularities that could signal potential issues.

It also provides assurance that the property's title has been properly transferred over time and that there are no legal complications attached to it.

Checking for outstanding debts or liens against the property is another crucial step. This can be done by requesting a letter of encumbrance from the BPN. If there are any mortgages, liens, or legal disputes tied to the property, they should be listed in this document.

These encumbrances are significant because, in Indonesia, they can transfer with the property. This means that if you purchase a property with existing debts or legal issues, you could become responsible for them.

To verify the accuracy of the property's measurements and boundaries as stated in the title deed, you might need to commission a land survey.

A licensed surveyor can compare the physical boundaries of the property with those recorded in the title deed. If there are discrepancies, resolving them usually involves legal processes, often requiring the involvement of the BPN, and possibly legal representation to adjust the title deed or resolve boundary disputes.

Zoning laws and land use restrictions are another critical aspect. These can be checked at the local government office or the BPN. They can provide information on how the land can be used, what structures can be built, and any future plans for the area that might affect the property.

This information is crucial because it dictates what you can and cannot do with the property.

After our research and the feedback collected from our local real estate partners, we have written an article about the risks and pitfalls when buying a property in Indonesia, you might want to check it out.

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How to update the title deed after the property transaction in Indonesia?

After purchasing a property in Indonesia and obtaining the Hak Milik (ownership title), it's crucial to update the title deed to reflect the new ownership.

This process starts with the preparation of a Sale and Purchase Agreement (Akta Jual Beli/AJB) by a notary. This document is the official confirmation of the sale and includes all pertinent details of the property, buyer, seller, and the transaction.

Next, the buyer is usually responsible for paying a transfer duty, known as Bea Perolehan Hak atas Tanah dan Bangunan (BPHTB). The receipt of this payment is necessary for the subsequent steps.

With the AJB and the BPHTB receipt in hand, the buyer then applies to the local office of the National Land Agency (Badan Pertanahan Nasional, BPN) to transfer the Hak Milik into their name. This application is essentially a request to update the land registry with the new ownership details.

The BPN conducts an official assessment to verify the transaction details and ensure everything complies with legal requirements. Following this, once the BPN approves the application, a new Hak Milik certificate is issued in the name of the buyer, completing the update process.

In terms of insurance and additional protections post-purchase, there are a few key types to consider. Property insurance is advisable to protect against damage from natural disasters, fire, or other accidents.

Title insurance, though less common in Indonesia, can offer protection against legal issues with the title after the purchase. If the property purchase involved a significant financial commitment, life insurance can be a prudent choice to ensure security for your dependents.

For foreign owners, it's important to understand the implications of Indonesian inheritance laws on property.

Hak Milik can be inherited, but foreign ownership is regulated. If a foreigner inherits a property, they might need to convert the Hak Milik to a title more suitable for foreign ownership, such as Hak Pakai (Right to Use).

This conversion process typically requires interaction with the BPN and may need legal assistance.

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This article is for informational purposes only and should not be considered financial advice. Readers are advised to consult with a qualified professional before making any investment decisions. We do not assume any liability for actions taken based on the information provided.