Indonesian Property Ownership Options for Foreigners

[colroe]

Roof leakage, so common. I have rented quite a few properties in Indonesia over the past 15 years and all, apart from my present property, have had leaks. Sometimes the owners will repair, but cheaply, and quite often nothing gets done. With the amount of rain here the Indonesians should be the best roof builders in the world!

 

[godmachine12]

I am 9 years in my own build house and never have leakages, Indonesians like to build roofs with all kind of funny corners, bad materials and don't know how to do it.
I made a simple saddle roof (like an upside down V) with good quality roof tiles, never had problems.

I'm still renting so I'm stuck with dodgy, flat (why do they do that anyway?) roofs for now. If I ever decide to build my own place, it won't have such a problem.

 

[waarmstrong]

Originally Posted by centurion
Your wife can buy the land/house as Hak Milik and give to you a Hak Pakai atas Hak Milik (right to use the land) on 30 years term. You will have uninterrupted right to live and your wife will have full title.
Additional to this If you want to be more secured that value of this land or part of it belongs to you after eventual divorce you can give your wife a loan for buying the land and install a mortgage (hak tanggungan) in your favor. No third party would buy a land with a mortgage and your hak pakai on it, it is too risky for the buyers and this will be your protection.

You'll never be able to own land outright as a foreigner, but this is by far the most logical solution that I've read.

I was thinking the same thing. It's the one suggested method I have read that appears to keep it legally "all in the family."

 

[Chiron]

In this continuing discussion related to property ownership, and how it relates to expats - specifically married to WNIs, it appears there is a way to consider the purchase of a Hak Milik property via one's spouse. The next topic my mind jumps to are closing costs and taxes. The only knowledge I have in this area was from a real estate agent in Indonesia who was showing me leasehold properties a few years ago. Basically these were nice apartments that had 30-40 year terms. I asked about the closing costs, and got a direct answer - 1% of the sale price would go the nortaris recording the leasehold deed. So on a $75K property, $750 would go to the notaris. There was no mention of taxes, but just a monthly management fee of around 1.5 million rupiah. This supposedly covered "everything" else. It was presented to me as the ultimate in simplicity. As a side note, I'm always vigilant to other issues lurking around the corner. I've learned that things are often not always that simple in Indonesia.

So what about Hak Milik transactions? Is that 1% fee typical for the notaris services? What about taxes collected at time of sale? As well, what about ongoing property taxes - how is that typically calculated? I've only heard that the ongoing taxes are pretty low - at least relative to what they are in the US. Finally, are there any other fees or considerations when buying a property Hak Milik? I believe there is something like neighborhood association (banjar?) fees - at least in places like Bali.

BTW, the assumption here, is this is a cash deal with no loan. I'm sure that loans have their own considerations - probably related to who's holding the title, among other things. From my observations, especially from my wheeling and dealing nephew-in-law, it's much more cleaner to just pay things in cash (if you have the means and ability to prepare for that). However, in answering the questions posted here, someone may also want to weigh-in on the whole bank loan process. Expats borrowing money from Indonesian banks might even be a separate thread to itself. The question here is only for a loan involving a home purchase.

 

[waarmstrong]

The fee to the notary is usually around the 1% number, but is certainly negotiable, especially as you progress up the price ladder. Transaction taxes for existing (not new from a developer) residences generally are 5% extracted from the seller and 5% from the buyer. Who actually pays the taxes is negotiable, as well. And the sale price used to calculate the tax is a moving target, but in practical terms cannot be less than the NJOP (the assessed or property tax value of the property).

Keep in mind that the agent(s) (whether a legally established agent [if there is such a category] or an informal agent) will expect a commission of 1% to 3% in total, also negotiable.

 

[Chiron]

Transaction taxes for existing (not new from a developer) residences generally are 5% extracted from the seller and 5% from the buyer. Who actually pays the taxes is negotiable, as well. And the sale price used to calculate the tax is a moving target, but in practical terms cannot be less than the NJOP (the assessed or property tax value of the property).

That's an interesting detail about not having transaction taxes on a new place from a developer. It would seem to deincentivize someone from buying homes from the existing housing market. In any case, something else to consider if the house needs to be sold in the future.

 

[dafluff]

That's an interesting detail about not having transaction taxes on a new place from a developer. It would seem to deincentivize someone from buying homes from the existing housing market. In any case, something else to consider if the house needs to be sold in the future.

No, buying from developers will actually trigger PPN (10%) and/or PPnBM (20%) which are higher than the 5% tax from private party.

 

[waarmstrong]

That's an interesting detail about not having transaction taxes on a new place from a developer. It would seem to deincentivize someone from buying homes from the existing housing market. In any case, something else to consider if the house needs to be sold in the future.

I did not say that there are no transaction taxes when buy a new property from a developer. I simply do not have any experience with such transactions, although I do know they are certainly taxed. I just do not know how the taxes are computed or who pays; the taxes on the transaction could be more than incurred with buying an "old" place, for all I know.

Perhaps another member has experience with buying a new place from a developer and can spell out the process.

 

[waarmstrong]

No, buying from developers will actually trigger PPN (10%) and/or PPnBM (20%) which are higher than the 5% tax from private party.

There you go. I vaguely recalled that the process was different; thanks for filling in the particulars.

 

[Chiron]

No, buying from developers will actually trigger PPN (10%) and/or PPnBM (20%) which are higher than the 5% tax from private party.

Thanks for keeping me on track here! Taxes and "other fees" are the often overlooked, and can be an unwelcome surprise if you don't see them coming. When I go to the malls in Indonesia, I'll often see salespeople for new housing developments handing out glossy brochures, often with scale models of the property. I may stop and ask how much they cost (which is usually not a good idea if you're in a hurry), and they will pull out a sheet and quote a price. Now I'll be sure to ask about PPN/PPnBM, to get the total actual price!

 

[centurion]

The recent update and stand from BPN (land agency) are that the decision of the MK for them is valid only for new cases. The old ones, who obtained "illegally" hak milik without prenup still have no legal ownership as they were under obligation to dispose it one year after getting the ownership, subject to seizing the property and putting it to a government auction if they did not do that.

 

[steveandpenny]

Ok just to make sure I understand (been told all sorts of things ). There is no way a couple of expats can really own a place in Indonesia even on a retirement visa.

The only reason I ask this stuipd question is that our sponsors said when we renewed our kitas that we could now own land here because of new law.

The more we think about it the less likely it sounds like a good idea. Renting might cost more but leaves the door wide open for changes.

Leasing seems like a option if in the future we want to build our own home. But right now we are content but sponsorer keeps looking for land for us (I'm sure it's about a commission).

 

[scouser59]

(3/15/2015)
The Minister of Agrarian Affairs who is also the head of the National Land Agency (BPN), Ferry Mursyidan Baldan, told Kompas.com that his office will soon survey and inventorying land “owned” by foreigners in Indonesia.

“It is absolutely not allowed for foreigner to own a single inch of land in Indonesia. This is as stipulated by the National Constitution,” said Ferryafter attending the re-launch of a magazine on zoning in Bandung on Sunday, March 8, 2014.

A reminder of the law .

 

[waarmstrong]

(3/15/2015)
The Minister of Agrarian Affairs who is also the head of the National Land Agency (BPN), Ferry Mursyidan Baldan, told Kompas.com that his office will soon survey and inventorying land “owned” by foreigners in Indonesia.

“It is absolutely not allowed for foreigner to own a single inch of land in Indonesia. This is as stipulated by the National Constitution,” said Ferryafter attending the re-launch of a magazine on zoning in Bandung on Sunday, March 8, 2014.

A reminder of the law .

More political hot air. Statements such as the one above are trotted out on a regular basis. The surveying and inventory never seems to get underway.

 

[Smallworld]

....

The only reason I ask this stuipd question is that our sponsors said when we renewed our kitas that we could now own land here because of new law.

The more we think about it the less likely it sounds like a good idea. Renting might cost more but leaves the door wide open for changes.

Leasing seems like a option if in the future we want to build our own home. But right now we are content but sponsorer keeps looking for land for us (I'm sure it's about a commission).

Strange I find renting out more cheaper in our case if we constantly rent out we can do it for 36 years. In 36 years the house mentioned house will be eaten by ants and termites, fallen apart and rebuild 3-10 times. Without weekly maintenance this house will deteriorate in a speed of light. As for owning a land as a foreigner it is not possible I am afraid - one of the biggest downside of Indonesia in my opinion. You can bypass it by having PMA business or nominee (not worth all the hassle). Good for companies which provide housing for employees nothing else. But the normal way: going to the seller, shake hands, sign the sales contract + notary, build a house is not allowed (unless you are married to Indonesian and your other half buy it under their name). Indonesia could change the rules for land ownership for those with KITAP, retirement KITAP people by giving them possibility to buy 0,5 ha of land to build house on it and live there - ONLY ONE KAVLING! At least it would make me feel like I have PR or some other bond in this country. I would also contribute to Indonesia by paying tax (land, house, buying property tax ect). But I understand it is hard to change law which was written when Stonehenge was build. Back then there were maybe only few foreigners living here and close to nothing international companies but times are changing and so should the legislations.

 

[Davita]

The Indonesian Constitution regarding land ownership was written when there was still some threat to Independence from the Dutch. To allay any fears those Belanda would return to claim the land they had stolen during occupation Sukarno's team wrote the Hak Milik title into Law.

I agree it's time to have a review in the interest of Indonesians. Foreign investors are looking for opportunities but need some guarantee of title before investing. Indonesians could prosper more if the FDI was increased due to those guarantees, like land ownership, being granted.

 

[Smallworld]

More political hot air. Statements such as the one above are trotted out on a regular basis. The surveying and inventory never seems to get underway.

I went 2-3 weeks ago to assist my wife to kantor pajak in Jakarta for her company enquiry. The state the tax office was shocked me to the bone. Thousands of boxes and million documents pages on the table. Each employee have tendency to build great wall of china around his desk so he can take a nap, play on mobile? Racks bending under the weight of countless tax reports. Boxes standing everywhere where the space is available. The most secret information is in the reach of a hand of someone who is not authorised can simply come in to the office - everyone. Imagine that suddenly your tax return disappear from the office (or the office gets burned down) and you may get the penalty. No wonder they often loose documents there. The staff was giving me the impression of total confusion and a hidden message: What are they doing here? They acted as if there were on some very powerful drugs. Next to the elevator there was a pallet of photocopy paper 3/4 height. All passages inside the office between the desks are very narrow like when you walk in passar traditional eg. Tanah Abang. Oh I wouldn't forget how dirty (as for office) the place was. Some warehouses, production floors are cleaner than what I have witnessed. I have never seen such a mess in my life....which brings me to question what warmstrong said: How the hell they are able to do any inventory or even find anything?

When from now on someone will say to me "The Augean Stables" I would have their office pictured in my mind... they should get some Hercules to clean it out.

 

[scouser59]

Strange I find renting out more cheaper in our case if we constantly rent out we can do it for 36 years. In 36 years the house mentioned house will be eaten by ants and termites, fallen apart and rebuild 3-10 times. Without weekly maintenance this house will deteriorate in a speed of light. quote

ha ha ! as we speak there are workers on behalf of the landlord replacing the bedroom door frame ,Termites ! 2 weeks ago they replaced part of the kitchen ceiling termites and leaks and so it continues , the almost weekly maintenance .

We are searching for a decent house to buy on the newly enacted postnup , but finding a well constructed house here is not easy because most of the property is falling down or about to !!!!

 

[El_Goretto]

The Pajak Penjual (seller tax) is down to 2.5%. The Pajak Pembeli (buyer tax) is 5%. At least, in Jabodetabek. It is calculated off the NJOP value or the transaction value, whichever is higher at the time of the deal.

The ongoing tax is called PBB and is paid yearly at the cost of 0.2% of the NJOP (value of the land or land + building as determined by the government and generally below market value).

 

[Smallworld]

Strange I find renting out more cheaper in our case if we constantly rent out we can do it for 36 years. In 36 years the house mentioned house will be eaten by ants and termites, fallen apart and rebuild 3-10 times. Without weekly maintenance this house will deteriorate in a speed of light. quote

ha ha ! as we speak there are workers on behalf of the landlord replacing the bedroom door frame ,Termites ! 2 weeks ago they replaced part of the kitchen ceiling termites and leaks and so it continues , the almost weekly maintenance .

We are searching for a decent house to buy on the newly enacted postnup , but finding a well constructed house here is not easy because most of the property is falling down or about to !!!!

Lucky you... mine bathroom door is half way rotten (in Cikarang) and I could not persuade our landlord to replace the door. He is immediately asking for higher rent .... since he didn't do that our rent stayed mostly unchanged. He did placed some metal sheet on top of the damaged door. But now the bottom part of the metal sheet is not only rusty but also is gone. Guess no one told him it is not stainless steel or maybe he followed the lower price.

As for the second sentence: Good luck with your search... so far I haven't found one. I would suggest if you have time.... buy some land.... get a descend working crew who will build your house... buy your own materials. From my observations the weakest point in most houses build in Indonesia is roof. I won't go into such extravagant things like ventilation shaft with proper air circulation in the house to keep it cool and as dry as possible especially if you have neighbours on the left, right and on the back of your house sometimes with their roof is one or more floor(s) higher than your house. It is simply suffocating your "Feng shui" hahahaha