Identifying serious offers - what to pay attention to when purchasing land

dafluff

Moderator
Moderator
Cager
Joined
Jul 13, 2016
Messages
3,937
Regarding power, I assume it is the same principle like when discussing road access? So, you should ask the seller for help to find a solution with the neighbors in case your land is locked in and has no access to electricity yet?

In case of public road access, but no access to electricity yet: Probably, it is the easiest way to lay the power line along the road then, so that you do not have to ask neighbors for permission? But are village officers usually cooperative and allow that? Probably, the potential buyer has to carry the costs for installation of the power line along the road then. But is it also common that the government/village officers reject a request for a power line along the street if someone wants to obtain access to electricity by that?

Access to water is also to consider but, regarding negotiation with neighbors, probably a less problematic topic since in most cases you can drill for water - and in most areas it is also possible to have water delivered in case of road access.

For power, if there is a public road, PLN has no issues planting poles on it and connecting you. There may be a fee for this, if it is a long distance, although i'm not sure if it is official...lol.

Water, as you have surmised, can be drilled for, and most of Indonesia does this.
 

Jamu

Well-Known Member
Charter Member
Cager
Joined
Jul 24, 2016
Messages
377
For power, if there is a public road, PLN has no issues planting poles on it and connecting you. There may be a fee for this, if it is a long distance, although i'm not sure if it is official...lol.

Water, as you have surmised, can be drilled for, and most of Indonesia does this.
Agreed. Regarding power, PLN always seems happy to add new customers. In my area, if you are extending coverage only for yourself and are not part of PLN's existing expansion plan, there is a 'per pole' charge of around Rp. 5 juta, plus standard hookup fees. For landlocked land it can be tricky since you cannot put poles on other people's land without their permission. Thus, any easement that you negotiate as part of your land purchase should be sufficiently wide to allow placement of a pole(s) in addition to vehicular access.

Regarding water, it depends on where you are. In Bali, some banjars are now supplying piped and metered water from a central source (eg, spring or river), and do not allow individual property owners to drill. Best to confirm this with your village.
 

make_batik_great_again

Well-Known Member
Joined
Nov 27, 2019
Messages
188
We've seen it quite often that:

(...)
  • to lower the taxes, the NJOP instead of the agreed price is used (quite common in Europe as well, pay partly in cash to lower the notary costs);

In the meantime, I have read about NJOP and found calculation examples. If the seller likes the land very much and/or thinks that the value will increase in the future, he might agree to a price that is higher than the NJOP.

Would the above mentioned procedure (NJOP instead of agreed price for tax and notary costs) be legal then? I read that usually the one with the higher amount needs to be taken into account. So, I think it cannot be chosen arbitrarily between NJOP and agreed price? Especially if you use a notary, I could not imagine that the notary would like or accept if NJOP would be taken into account if it is lower than the agreed price; especially because his own profit would be lowered if the seller and buyer can arbitrarily choose between NJOP and agreed price, whichever holds the lower amount.
 
Last edited:

make_batik_great_again

Well-Known Member
Joined
Nov 27, 2019
Messages
188
One more question regarding the NJOP. Some people claim that the NJOP can also be regarded as "real" market value. But is this true? I think there are several constellations where the NJOP might be much higher or much lower than the market price; so, I doubt that the NJOP is a reliable indicator of the real market price/value.

One example: Someone owns a huge area located on the top of the hill, 10-15 minutes from a tourism hotspot. He has an ocean view from the hill. Behind this hill, the land is flat and some farmers live there, no tourism or anything else in the village yet. Now the owner of the land splits his land into smaller plots and offers the land which is located on the hill.

He will probably be able to receive a much better price than the NJOP since the hill land´s NJOP probably is aligned on the NJOP of the flat area behind the hill (since there probably will not be separate estimation of NJOP for every hill). But the market price of the hill´s land probably is much higher since the view might contain toursim potential and/or might be more attractive to wealthy buyers who are looking for a nice location for their villa or similar.
 

dafluff

Moderator
Moderator
Cager
Joined
Jul 13, 2016
Messages
3,937
Legally, NJOP is the minimum value of the land/property for the purpose of calculating transfer tax. It has nothing to do with the actual value of the land. The majority of the time NJOP is significantly lower than actual sale value, but not always.

To follow the letter of the law, in case the sale was lower than NJOP, then NJOP value is used when determining transfer tax. In cases where the sale price was higher than NJOP, then the actual price is used.

In reality, most Indonesians will balk at paying tax on full sale price, so just be aware of this.
 

make_batik_great_again

Well-Known Member
Joined
Nov 27, 2019
Messages
188
Legally, NJOP is the minimum value of the land/property for the purpose of calculating transfer tax. It has nothing to do with the actual value of the land. The majority of the time NJOP is significantly lower than actual sale value, but not always.

To follow the letter of the law, in case the sale was lower than NJOP, then NJOP value is used when determining transfer tax. In cases where the sale price was higher than NJOP, then the actual price is used.

In reality, most Indonesians will balk at paying tax on full sale price, so just be aware of this.

Ok, in the future I will ignore the people who claim that the NJOP was an indicator for the real market value then :)

Maybe because of being new to this country and coming from a country with very strict laws regarding taxes, I do not totally understand how it can happen that the theory says that the higher amount (NJOP vs. sales price) is considered in order to calculate the transfer tax...but in reality it is often not the case. I also heard from someone who said that his notary negotiated the transfer tax for him. But I wonder who it is in the end who determines the payable transfer tax? And if this amount is less than 5% of the sales price (or NJOP if NJOP is higher than sales price), couldn´t it happen that the buyer will have problems later on because of paying too less transfer tax?
 

dafluff

Moderator
Moderator
Cager
Joined
Jul 13, 2016
Messages
3,937
Ok, in the future I will ignore the people who claim that the NJOP was an indicator for the real market value then :)

Maybe because of being new to this country and coming from a country with very strict laws regarding taxes, I do not totally understand how it can happen that the theory says that the higher amount (NJOP vs. sales price) is considered in order to calculate the transfer tax...but in reality it is often not the case. I also heard from someone who said that his notary negotiated the transfer tax for him. But I wonder who it is in the end who determines the payable transfer tax? And if this amount is less than 5% of the sales price (or NJOP if NJOP is higher than sales price), couldn´t it happen that the buyer will have problems later on because of paying too less transfer tax?

There are two taxes, one applicable to the buyer, one to the seller. The seller pays income tax, for property sale calculated at a flat 2.5% on the value of transaction. The buyer pays transfer tax which varies by region/value of property, but it is a percentage x (value of transaction (or NJOP if higher) minus an allowance).

The latter has to go through the regional tax office (DisPenDa), and here often the transaction value gets obfuscated. For this to work the notary needs to also be complicit, meaning that they record a lower transaction value than actual.

Of course there is the possibility of issues down to road, especially for the seller, since they have to reconcile their added money. Because of this, transactions now record very close to actual value.
 

make_batik_great_again

Well-Known Member
Joined
Nov 27, 2019
Messages
188
I just read on another website about your second point. The article stated that it is possible that the zoning status of the land gets changed in the ITR without the owner of the property being informed about it - and therefore, it can happen that the status from the SKT is not up to date anymore and therefore does not match with the status in the ITR.

Can someone here confirm what I read (that zoning status of land can be changed without the owner getting to know about it)? If I buy land and at that time I was allowed to build. Could it happen that when I want to start to build, for example three years later, the zoning has been changed in the ITR in the meantime (for example to land for farming purposes only) so that I am not allowed to build anymore?
 

jstar

Mr. 10,000
Joined
Jul 31, 2016
Messages
4,304
I guess it depends where you are located, I've never seen a change in the spacial plans (RTRW) where we have been active, triggered by the government.

But I've seen many violations and buildings that are not permitted by zoning regulations.

People who plan to do that, often don't try it the official way (there are huge penalties for government officials who provide wrong permits), but just build without an IMB or lie on its purpose.
 

make_batik_great_again

Well-Known Member
Joined
Nov 27, 2019
Messages
188
I guess it depends where you are located, I've never seen a change in the spacial plans (RTRW) where we have been active, triggered by the government.

But I've seen many violations and buildings that are not permitted by zoning regulations.

People who plan to do that, often don't try it the official way (there are huge penalties for government officials who provide wrong permits), but just build without an IMB or lie on its purpose.

Yes, I heard about people building without IMB. I would not take the risk, and I would respect the law/regulations.

The reason for my question was: We are interested in land where we are allowed to use 60% of the land to put our building on. But we consider to wait a year, maybe even more, until we start building. So, I wonder how likely it is that we might not be allowed anymore to build in a few years...or to put it that way: How often it happens that purpose/regulations of land is changed. I assume cases like that are quite rare.
 

Helpful Herbert

Well-Known Member
Joined
Mar 24, 2019
Messages
497
We are currently househunting and a common situation seems to be that the owner of a property dies and his family then try to sell it. Sometimes it is still in the name of the old owner, who is dead. In these "warisan" situations you need to ask how many children etc. now have a right to ownership and this will then be confirmed at the Notary (signed by all of them), also check the death certificate (I believe this should include names of descendants) and thirdly a chat with Pak RT could also uncover any undisclosed wives/children. You certainly don't want somebody turning up in a few years laying claim to the property.
 

make_batik_great_again

Well-Known Member
Joined
Nov 27, 2019
Messages
188
We've seen it quite often that:
  • an owner did not want to sell at all, but just puts something on the market because of curiosity / check the temperature of the water / to consider selling if they get a crazy offer / .... . That can hardly be called serious, it happens more -but not only- if there are no agents involved;
  • there are multiple listings for one property by agents, which do not even have the same asking price;
  • there are multiple agents working for one owner, while the owner only has an agreement with one of them. So (s)he is not aware of the others. Then it might become an issue for the fees;
  • once you start bidding, the price goes up. Esp. if you belong to a certain race;
  • to lower the taxes, the NJOP instead of the agreed price is used (quite common in Europe as well, pay partly in cash to lower the notary costs);
  • it is unclear who exactly the owners are, very often there are multiple family members, sometimes not even on speaking terms.
Just out of the top of my head...
.

About the bullet point in bolt:

Since I heard that this really happens sometimes, I wonder how one should behave in that situation. How should the buyer behave if the seller wants to "lower" his part of the taxes? If I am still up-to-date, the buyer has to pay 5.0% taxes and the seller 2.5%. If the buyer is honest and clarifies and pays 5.0% of the real selling price. But the seller refuses to pay the correct amount (by using the NJOP or just declaring a lower selling price). Is there a risk for the buyer then as well?

I mean, the buyer did not do anything wrong then since the seller was the one that declared not the correct amount of taxes. But would this be only the liability and risk of the seller? Or could this become a problem for the buyer later on as well? Is the tax liability connected to the land? So, when buying a property, you would be liable for any open taxes? Even if someone else (in this case the seller) did not clarify the correct amount in the past?
 

dafluff

Moderator
Moderator
Cager
Joined
Jul 13, 2016
Messages
3,937
About the bullet point in bolt:

Since I heard that this really happens sometimes, I wonder how one should behave in that situation. How should the buyer behave if the seller wants to "lower" his part of the taxes? If I am still up-to-date, the buyer has to pay 5.0% taxes and the seller 2.5%. If the buyer is honest and clarifies and pays 5.0% of the real selling price. But the seller refuses to pay the correct amount (by using the NJOP or just declaring a lower selling price). Is there a risk for the buyer then as well?

I mean, the buyer did not do anything wrong then since the seller was the one that declared not the correct amount of taxes. But would this be only the liability and risk of the seller? Or could this become a problem for the buyer later on as well? Is the tax liability connected to the land? So, when buying a property, you would be liable for any open taxes? Even if someone else (in this case the seller) did not clarify the correct amount in the past?

This scenario is not possible, because the tax is calculated based on the declared transaction at the Notaris/PPAT and reported to the government. So the buyer and seller (and Notaris/PPAT) both have to agree to cheat taxes.
 

waarmstrong

Well-Known Member
Charter Member
Cager
Joined
Jul 17, 2016
Messages
2,439
In DKI, fudging the numbers provided to the tax office is SOP regardless of which side of the deal you are on. No different on the other side of the world; take our departing Commander in Chief as exhibit A in support of that position.
 

Balifrog

Well-Known Member
Joined
Nov 28, 2017
Messages
320
When buying land / property as a foreigner in countries like here, write it off on your balance sheet the day you pay it.
As simple as that. Too many unknown, legal or political concerning the future.
Without even mentioning the "companion" kicking you out....

Not specific to Indo.
 

Helpful Herbert

Well-Known Member
Joined
Mar 24, 2019
Messages
497
I'm sure there's no risk of your companion kicking out such a friendly, tolerant and positive person as Balifrog.
 

make_batik_great_again

Well-Known Member
Joined
Nov 27, 2019
Messages
188
This scenario is not possible, because the tax is calculated based on the declared transaction at the Notaris/PPAT and reported to the government. So the buyer and seller (and Notaris/PPAT) both have to agree to cheat taxes.

In DKI, fudging the numbers provided to the tax office is SOP regardless of which side of the deal you are on. No different on the other side of the world; take our departing Commander in Chief as exhibit A in support of that position.

Then I assume...if you get into that situation where your counterpart does not want to declare the real transactional amount, you would have 3 possibilites?

1) Step back from the transaction. This could be quite difficult. And maybe not a realistic option if you already transferred a down payment.

2) Convincing the counterpart to declare the real transcational amount by offering him to pay his "additional" tax as well. Pretty unfair for the honest person then, of course.

3) Unavoidably accepting the "rules" (declaring lower transactional amount) of your counterpart. Wouldn´t it be the task of the notary to moderate the tax modalities and inform both seller and buyer about the correct amount of taxes anyway?
 

dafluff

Moderator
Moderator
Cager
Joined
Jul 13, 2016
Messages
3,937
Then I assume...if you get into that situation where your counterpart does not want to declare the real transactional amount, you would have 3 possibilites?

1) Step back from the transaction. This could be quite difficult. And maybe not a realistic option if you already transferred a down payment.

2) Convincing the counterpart to declare the real transcational amount by offering him to pay his "additional" tax as well. Pretty unfair for the honest person then, of course.

3) Unavoidably accepting the "rules" (declaring lower transactional amount) of your counterpart. Wouldn´t it be the task of the notary to moderate the tax modalities and inform both seller and buyer about the correct amount of taxes anyway?

Number 2 if you want to stay 100% legal.

Yes, Notary should moderate, but in the end, what they really care about is that the transaction goes through so that they get paid.
 

Ruserious

Well-Known Member
Joined
Aug 31, 2016
Messages
327
I guess most purchases here dont include mortgages then? Surely the mortgage company would get a look at the tax forms and see the total amount declared?
 

Follow Us

Latest Expat Indo Articles

Latest Tweets by Expat Indo

Online Now

Newest Members

Forum Statistics

Threads
4,720
Messages
72,120
Members
2,068
Latest member
RobertBali
Top Bottom