FREQUENTLY ASKED QUESTIONS
Asking questions is an important part of the learning process and creating peace of mind.
We’d like to share some our most frequently asked questions here to help you along your journey to owning property in Indonesia.
We deal with a lot of investors from just one person looking for a beautiful place to live, to large international groups developing islands and infrastructure. But no matter who it is, there are similar challenges.
We’re trying to address these challenges as early as we can in the process and we believe the key to that is to look at what we’re calling an “Investment Road Map.”
There are important reasons for this.
For expats, ownership structures and which ones to consider will have a huge impact on any investment decision.
For locals, zoning and permits are important areas to look at. We believe the government will also look at these aspects as well as we move forward.
Don’t get us wrong; the government wants both foreign and domestic investment in Indonesia, but they want it to be in long term, sustainable and structured. Follow this link to find out more.
This is the biggie.
One of the first things to understand is there are foreign ownership rules and regulations and we suggest you get to know them.
Indonesia’s Agrarian Law called Undang-Undang No.5 Tahun 1960 article 16 (1) is based on the Indonesian Constitution. It covers seven kinds of ownership structure but for our purposes only four of these apply. These are:
Hak Milik or Freehold
Hak Guna Bangunan (HGB) or Right to Build
Hak Pakai or Right to Use
Hak Sewa or Leasehold
An Indonesian citizen is entitled to use any of these structures.
A foreigner is not.
In December 2015, the government updated the property ownership laws making it easier for foreigners to own land and property under Hak Pakai and Hak Sewa for residential properties and Hak Guna Bangunan for commercial titles. If someone tells you different or suggests you use a nominee to get a Freehold or Hak Milik title, don’t turn and walk away, run!
In all cases you need to show that you are partly living, working, retiring or investing in Indonesia.
Tourist visas do not count!
Hak Pakai certificates are valid for 80 years with automatic extensions after 30 years and 50 years.
Hak Sewa certificates can range from one year up to the same maximum length as Hak Pakai, for a total of 80 years.
If you’re not comfortable with either Hak Pakai or Hak Sewa another option is to create a foreign owned company (called a PMA.) This company can legally have a Right to Build (HGB) certificate. You own the company and the company owns the property.
Nino SAUNUNU, SH, a member of the Seven Stones Legal Team recently wrote a very informative blog on the subject, which we recommend you spend a few minutes reading. Follow this link to read Nino’s blog.
You don’t want to be paying over the odds right?
We’ve seen tremendous growth in both land and property prices in all parts of Bali but now for the first time we’re seeing that certain areas are experiencing a slow-down.
This isn’t rocket science to the savvy investor, especially if we consider that business ventures have to make financial sense of their investment. And the truth of the matter is that it doesn’t in areas like Seminyak and Sunset where land has reached the dizzying heights of IDR 3,000,000,000 (that’s billion!) Rupiah per are (10 x 10-square metres)!
This hefty price tag combined with things like height restrictions to whatever can be built is pushing interest to other, cheaper parts of the island such as Canggu further west, Ubud to the north and all along the east coast because of the more attractive ROIs.
Short answer is YES! Especially as President Jokowi was recently re-elected to a second 5-year term.
Longer answer explains why … since the government’s recent reshuffle, Indonesia has really gotten up to speed, revoking thousands of regulations, which were hindering investments. On top of that, it has issued 12 economic stimulus packages in less than 18 months, amongst other initiatives, specifically designed to encourage investment.
We see this as a very positive step in the right direction as Indonesia tries to normalize itself and continue to fight corruption through better law enforcement than it ever did in the past.
The bottom line is that Indonesia is one of the richest countries in the world when it comes to natural resources with one of the largest productive populations on earth being led by a democratic and proactive government.
Indonesia receives the second highest amount of foreign investments in the world after China and its debt exposure compared to the National Budget is on the same level as Norway. There is no better place to invest right now and domestic investors are jumping at the opportunities to absorb cheaper assets. All the underlying indicators are solid and positive. They don’t want to lose out, the question is do you?
This is a sensitive subject.
In general infrastructure appears to be improving and the new government is addressing issues with speed and a lot of money.
For some people though it’s a matter of too little – too late, but these are the sorts of people who will try to find holes in any initiative, just because they’re wired that way. It doesn’t mean their negative opinions are right.
The truth of the matter is that infrastructure projects are being given priority all over the country, particularly in Bali and we can expect to see more projects in the very near future.
The central government is trying to focus all provinces towards alternative energy especially in the areas of solar, hydro and geo-thermal, resulting in many projects lining up for the immediate future. Solar energy seems to be the flavour of the month and the Balinese provincial government is trying to get legislation approved to have solar panels on every government owned building.
Water is a big challenge for Bali and the next drive needs to be on enforcing hotels and housing projects to recirculate and reuse water. If this isn’t addressed very soon it will peak and ultimately have a negative impact on the island. The political will, or lack thereof, has been the main stumbling block on this issue but now that is changing and positive steps are being made.
There are a broad range of schools in Bali, which teach to international standards. A growing number of parents, charmed Bali’s more relaxed lifestyle, safe environment and rich culture are opting to relocate to Bali to raise their families.
The most popular schools and those offering the best educators and facilities include:
Click on the name of each school to go to their websites.
By law you need to operate under a company. If you operate privately you breach tax and immigration laws. If you operate under a local you are liable for double taxation. The best and most transparent way is to set up a company.
You don’t need to have staff for the sake of it but it would probably be a good idea in terms of operating and maintenance.
No, unless it is specifically written into an agreement. It’s worth remembering the Pondok Wisata is a permit that only Indonesians can hold. Foreigners cannot have a Pondok Wisata. A company however, can hold other types of permits and can operate a villa that’s already been issued with a Pondok Wisata permit.
Yes. And this should be clear in any agreement you sign. In general, we recommend people consolidate their ownership of their asset in a PT PMA, then look at management options.
No. This is why your agreements need to be clear and understood by all parties.
Normally no. But this would depend on your agreement. One aspect to be clear about is who is responsible for paying the yearly land and building tax.
In some cases property owners will apply for a Pondok Wisata and more than one owner will operate under a joint license. It’s not a huge issue but our recommendation is to have sole control of the operational permit.
If you buy as an individual the law states you need residential status. If you purchase through company then the answer is no.
No, you don’t need to be a resident, unless you do want to work here and then you do need a work permit.
It’s fairly easy and takes about 30-days to set up a PMA. You do need a commercial address (many companies provide this) and hiring staff depends on your requirements. You are not obliged to hire staff.
At the moment this is not easy.