Authored by the expert who managed and guided the team behind the Indonesia Property Pack
Yes, the analysis of Jakarta's property market is included in our pack
If you're considering investing in property in Jakarta, you're likely drawn to its vibrant culture and booming real estate market.
But what legal requirements must you navigate to make this dream a reality? Are there specific regulations for foreigners? What documents will you need?
In this article, we'll break down the legal essentials you need to know before buying property in Jakarta.
Actually, we know this market inside and out. We keep tabs on it regularly, and all our discoveries are reflected in the most recent version of the Indonesia Property Pack
Legal Requirements for Buying Property in Jakarta
When purchasing property in Jakarta, there are several legal requirements that must be met. These requirements vary depending on the buyer's nationality and the type of property being purchased. Below is a detailed table outlining these requirements.
| Requirement | Description | Additional Notes |
|---|---|---|
| Nationality | Foreigners are generally restricted from owning freehold property in Indonesia. They can, however, acquire property through leasehold or by setting up a local company (PT PMA). | Foreigners can lease land for up to 80 years. |
| Property Type | Foreigners can purchase apartments under the "Right to Use" (Hak Pakai) title, but not landed houses. | The apartment must be priced above a certain threshold set by the government. |
| Land Title | Ensure the property has a clear and legitimate land title, such as "Hak Milik" (freehold) or "Hak Pakai" (right to use). | Consult a legal expert to verify the title's authenticity. |
| Due Diligence | Conduct thorough due diligence, including checking for any encumbrances or disputes related to the property. | Engage a notary or legal advisor for assistance. |
| Notary Involvement | A notary must be involved in the transaction to draft and authenticate the sale and purchase agreement. | The notary's fee is typically a percentage of the property's value. |
| Tax Identification Number (NPWP) | Both the buyer and seller must have a Tax Identification Number (NPWP) for the transaction. | Foreigners may need to obtain an NPWP if they do not already have one. |
| Payment of Taxes | The buyer is responsible for paying the Land and Building Acquisition Duty (BPHTB), while the seller pays the Income Tax (PPh) on the sale. | BPHTB is typically 5% of the property's value. |
| Bank Account | Foreign buyers may need to open a local bank account to facilitate the transaction. | This can also help with currency exchange and transfer issues. |
| Government Approval | Certain transactions, especially those involving foreign buyers, may require approval from the Indonesian Investment Coordinating Board (BKPM). | This is particularly relevant for purchases through a PT PMA. |
| Legal Representation | It is advisable to hire a local lawyer to navigate the legal complexities of property purchase in Indonesia. | Ensure the lawyer is experienced in real estate transactions. |
| Currency Regulations | Transactions must be conducted in Indonesian Rupiah (IDR) as per local currency regulations. | Foreign currency transactions are not permitted for property purchases. |
| Compliance with Zoning Laws | Ensure the property complies with local zoning laws and regulations. | This is crucial for future development or renovation plans. |
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What You Need to Know Before Buying Property in Jakarta
What are the legal requirements for foreigners buying property in Jakarta?
Foreigners are allowed to purchase property in Jakarta under the "Right to Use" (Hak Pakai) title, which is valid for a maximum of 80 years with extensions.
To qualify, the foreign buyer must reside in Indonesia or have a valid work permit.
Additionally, the property must be a new build and not exceed a certain price threshold set by the government.
How much is the minimum property price for foreigners in Jakarta?
The Indonesian government has set a minimum property price for foreigners, which is currently at IDR 10 billion for apartments in Jakarta.
This regulation is intended to ensure that foreign investment targets the high-end property market.
It is important to verify the current price threshold as it may be subject to change.
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What taxes are involved in purchasing property in Jakarta?
Buyers are required to pay a Land and Building Acquisition Duty (BPHTB) of 5% of the property value.
Additionally, there is a Value Added Tax (VAT) of 10% applicable to new properties.
It is crucial to budget for these taxes as they can significantly impact the overall cost of purchasing property.
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Are there any restrictions on the type of property foreigners can buy?
Foreigners are restricted to purchasing apartments and are not allowed to buy landed houses directly.
The property must be a new development and cannot be part of a subsidized housing program.
These restrictions are in place to protect local housing markets and ensure availability for Indonesian citizens.
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What is the process for obtaining a property title in Jakarta?
The process involves several steps, including obtaining a Land Certificate from the National Land Agency (BPN).
Buyers must also ensure that the property is free from disputes and has a clear title before proceeding.
Engaging a local notary can help navigate the legal requirements and ensure a smooth transaction.
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How long does it typically take to complete a property purchase in Jakarta?
The entire process, from initial agreement to finalizing the purchase, can take between 3 to 6 months.
This timeline includes due diligence, obtaining necessary permits, and completing legal documentation.
Delays can occur due to bureaucratic processes or issues with property titles, so it's important to plan accordingly.
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What financing options are available for property purchases in Jakarta?
Foreigners can access mortgage financing through certain Indonesian banks, although terms may vary.
Typically, banks offer loans covering up to 70% of the property's value, with the remainder paid as a down payment.
Interest rates and loan terms can differ, so it's advisable to compare options and consult with financial advisors.
What are the ongoing costs associated with owning property in Jakarta?
Property owners are responsible for annual Land and Building Tax (PBB), which is calculated based on the property's assessed value.
Maintenance fees for apartments can range from IDR 20,000 to IDR 50,000 per square meter per month, depending on the facilities.
It's important to factor in these costs when budgeting for property ownership in Jakarta.
Can property ownership be transferred to heirs or sold to another foreigner?
Property under the "Right to Use" title can be transferred to heirs, provided they meet the legal requirements for ownership.
Selling the property to another foreigner is possible, but the buyer must also comply with the regulations for foreign ownership.
Consulting with a legal expert can help ensure compliance with inheritance and transfer laws.
What are the potential risks of buying property in Jakarta?
Risks include potential changes in government regulations affecting foreign ownership rights.
There may also be issues with property titles, such as disputes or unclear ownership history.
Conducting thorough due diligence and working with reputable agents can help mitigate these risks.
How does the property market in Jakarta compare to other major cities in Indonesia?
Jakarta's property market is generally more expensive than other cities due to its status as the capital and economic hub.
Prices in Jakarta can be 20% to 50% higher than in cities like Surabaya or Bandung.
However, Jakarta offers more investment opportunities and a higher potential for rental income.
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What are the benefits of investing in property in Jakarta?
Investing in Jakarta property can offer high rental yields due to strong demand from expatriates and local professionals.
The city's infrastructure development and economic growth contribute to potential capital appreciation.
Additionally, owning property in Jakarta provides a foothold in one of Southeast Asia's most dynamic markets.