As Bali officials and licensed villa operators ramp up efforts to crack down on illegal foreign-owned rentals, questions about the legal pathways for foreigners to own property in Indonesia have become more pressing.
Recent moves—including discussions of new regional regulations and increased enforcement against nominee agreements—highlight the importance of understanding the legal framework before investing.
Foreign nationals (WNA) do have opportunities to own property in Indonesia, but specific regulations govern the process. Navigating these rules is crucial for ensuring compliance, avoiding legal pitfalls, and securing long-term investment stability.
Legal Framework for Foreign Property Ownership in Indonesia
The Indonesian government has established legal provisions that allow foreigners to purchase property within the country. This is regulated under several key laws:
- Government Regulation No. 103 of 2015 – Covers ownership of residential properties by foreigners residing in Indonesia.
- Government Regulation No. 18 of 2021 – Governs land management rights, property ownership, and registration.
- Ministerial Regulation No. 18 of 2021 – Outlines the procedures for determining land rights and ownership.
Under these regulations, foreigners can own two types of properties:
- Landed houses (rumah tapak) built on designated land.
- Apartments (rumah susun) classified as commercial properties.
However, these properties must be built on land zoned for Hak Pakai (Right-to-Use) and meet additional government conditions.
Requirements for Foreigners Buying Property in Indonesia
Foreign buyers must meet the following requirements:
- Valid Immigration Documents
Foreign buyers must hold valid immigration documents such as a passport, visa, or a limited stay permit (KITAS) issued by Indonesian authorities. - Limited Stay Permit (KITAS) Requirement
According to Government Regulation No. 103 of 2015, foreign buyers must obtain a Kartu Izin Tinggal Terbatas (KITAS). This permit, issued by the Ministry of Law and Human Rights, typically needs renewal every two years. - Right-to-Use Certificate (Hak Pakai)
Unlike Indonesian citizens, who receive full ownership rights (Sertifikat Hak Milik/SHM), foreigners can only obtain a Hak Pakai certificate, which:- Is valid for 30 years.
- Can be extended for another 20 years.
- May be renewed for an additional 30 years, allowing a maximum tenure of 80 years.
- Minimum Property Price Restrictions
To prevent excessive foreign ownership and maintain housing affordability, the government has set minimum price thresholds for foreign property purchases. Based on Ministerial Decree No. 1241/SK-HK/IX/2022, the minimum purchase prices are as follows:For landed houses (rumah tapak):- Jakarta – Rp10 billion
- Bali, West Java, Banten, East Java, Yogyakarta – Rp5 billion
- North Sumatra – Rp2 billion
- West Nusa Tenggara (NTB) – Rp3 billion
- South Sulawesi, East Kalimantan – Rp2 billion
- Other provinces – Rp1 billion
- Jakarta – Rp3 billion
- Bali, West Java, Banten, East Java, Yogyakarta – Rp2 billion
- Other provinces – Rp1 billion
Can Foreigners Rent Out Their Property?
Foreigners who own property under a Hak Pakai (Right-to-Use) certificate in their personal name cannot legally rent it out, as it is strictly designated for personal residential use.
However, there are alternative legal structures that allow foreigners to generate rental income:
- Leasehold Agreements (Hak Sewa)
Foreigners can lease land or property under a Hak Sewa (Right-to-Lease) agreement for a specified period (typically 25–30 years, with possible extensions) and rent it out legally. This does not involve ownership but provides a long-term investment option. - Setting Up a Foreign-Owned Company (PT PMA)
Foreign investors can establish a foreign direct investment company (PT PMA) in Indonesia, which can acquire Hak Guna Bangunan (Right-to-Build) or Hak Pakai land rights. A PT PMA can legally operate rental businesses, including short-term and long-term leases. This is the only fully legal way for a foreigner to run a rental business.
Additional Considerations
- Foreigners can own only one plot of land per person or family under Hak Pakai.
- The purchased landed house must be classified as a luxury property.
- Transactions must be processed through notarial agreements and registered with the National Land Agency (BPN).
- The Indonesian government is increasing enforcement against nominee arrangements, where locals hold property on behalf of foreigners—such practices are illegal and risky.
These regulations aim to control foreign property ownership while maintaining housing affordability for Indonesian citizens. For further details, prospective buyers should consult the official website of Indonesia’s Ministry of Agrarian Affairs and Spatial Planning.
By understanding these rules, foreigners can navigate the Indonesian property market more effectively while ensuring compliance with local regulations.
Disclaimer
This article is for informational purposes only and is based on publicly available sources and research conducted by our journalists. It does not constitute legal advice. Readers are strongly encouraged to consult a qualified legal professional before making any property-related decisions in Indonesia. Indonesian property market more effectively while ensuring compliance with local regulations.
