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Real Estate Investment in Indonesia

Oct 12, 2007
Located in South East Asia, Indonesia is an archipelago, with about 17,000 islands such as Sumatra, Java, Bali, Kalimantan, Sulawesi, the Moluccas Islands, and Irian Jaya. With its diverse landscape, untouched beaches, lush green forests, and volcanic mountains, Indonesia is truly an exotic destination.

Real estate in Indonesia is a hot sector, with residential units and commercial buildings as well as industrialized plants sprouting all over the nation. In other words, Indonesian real estate sector has globally marked its establishment in all respects. Low interest rates and robust consumer spending has led to a tremendous economic growth.

Indonesia also boasts of more than 10 billion barrels of oil reserves as well as 150 trillion cubic feet of potential reserves. Further, the innovative measures taken by Indonesia to well organize its natural resources have now caught the attention of many global investors.

People from across the world also flock here for a myriad of other purposes such as for education or employment requirements. Perhaps for these reasons real estate in Indonesia is of special significance. Most of the real estate investments have been found in metropolitan areas like Jakarta. Indonesia provides almost all types of real estate, from luxury villas and homes to guest houses, hotel resorts and land.

As in the case of other Asian nations, several laws and regulations have been formulated for the acquisition of a real estate in Indonesia. Different types of titles are associated with the purchase of a land in Indonesia. Foremost is Hak Milik, otherwise freehold title. This type of title could be held only by a national of Indonesia. Further, property ownership with this title is considered the most complete form of land ownership in Indonesia, and it possesses complete right to exchange, sell, bequeath, or transfer to eligible recipient.

Certain restrictions have been imposed on foreigners to buy a land in Indonesia. A foreigner cannot purchase a land outright in Indonesia. However, three options are opened for non-Indonesian to buy or acquire a land in the country, such as, leasehold investment, Indonesian nominee power of attorney agreement, and PMA Foreign Investment Company Structure.

Leasehold investment provides complete protection to a non resident investor during the term of lease agreement, which in turn is prepared for a specific period, usually extending up to 25 years. Mostly, options would be there for extension. This agreement is also inclusive of the foreign investor's options regarding the right for the land or building demolishing, renovation, or demolishment. A land or property acquired through this option holds a kind of title known as Hak Pakai or leasehold title.

In the case of Indonesian nominee power of attorney, a foreign investor can enter a legal agreement through a nominee who is a permanent resident of the nation. Al though, this nominee is the registered owner, the foreigner holds the land certificates. On purchasing the property, both nominee and investor sign a legal power of attorney. Once the power of attorney is signed, all of the nominee's rights with regard to property are waived and the investor is given complete right on the property. Accordingly, the investor can build, sell, or lease the property. Further, he can even transfer the property.

PMA (Penanaman Modal Asing) Foreign Investment Company Structure is primarily designed for enabling foreign business firms or corporations to purchase a property in Indonesia. However, property acquisition does not provide complete ownership to the foreign investors. This type of property acquisition holds the title of HGB (Hak Guna Bangunan.)

In order to conduct a real estate transaction in the country, real estate sales people are not required to hold a license. Among the procedures in connection with the buying of property in Indonesia are examination of land certificate at the Land office, payment of transfer tax by salesperson at a commercial bank, payment of tax on acquisition of the land and building by the buyer, filing for company tax registration number with the local tax authorities, execution of sale and purchase of land deed through a legal representative appointed by an executive of the National Land Office, Registration of the Land deed under the name of the buyer with the Local Land Office, and Land Deed at the Tax on Land and Building Office.

No matter it is single detached home, villa, apartment, office, or industrial space, a large number of realtors and real estate firms are now there to find and buy your dream property in Indonesia.
About the Author
Wantanee Khamkongkaew is an independent author evaluating and commenting on leading International Property Consultants in Asia and Greater China , especially CB Richard Ellis.
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