Buying Property in Indonesia: Foreign Buyer Legal Checklist

What are the main types of land and property rights in Indonesia?

The main land rights in Indonesia are Hak Milik (freehold), Hak Guna Bangunan (HGB - right to build), Hak Pakai (right to use), and several special-use rights, all created by the Basic Agrarian Law (Law No. 5 of 1960). Each right has different holders, durations, and transfer rules, and your strategy should be built around which right you can legally hold.

Core legal framework

• Basic Agrarian Law (Undang-Undang Pokok Agraria - UUPA) No. 5 of 1960: foundation of Indonesia's land law.
• Government Regulation No. 24 of 1997 on Land Registration: governs registration procedures and certificates.
• Various implementing regulations from the Ministry of Agrarian Affairs and Spatial Planning / National Land Agency (Kementerian ATR/BPN).

Key land rights and who can hold them

Practical implications for buyers and investors

• For Indonesian individuals: Hak Milik is usually the most secure for residential property, but many houses are held under HGB, especially in modern developments.
• For Indonesian and foreign companies (including PT PMA): HGB is the standard title for commercial, industrial, and many residential projects.
• For foreigners personally: you typically access property via Hak Pakai over a house/apartment, or via lease rights, subject to specific rules explained below.
• Strata title (HMSRS): for apartments and condominiums, you own the unit plus a share of common areas; the land beneath is generally Hak Milik or HGB held by the developer or association.

How can foreigners own or control real estate in Indonesia?

Foreign individuals cannot hold freehold land (Hak Milik) in Indonesia, but they can legally control property through Hak Pakai, long-term leases, and shareholding in foreign investment companies (PT PMA) that hold HGB/Hak Pakai. Nominee arrangements using Indonesian individuals to "hold" Hak Milik on behalf of foreigners are legally risky and heavily discouraged.

Foreign individuals

• Hak Pakai over residential property: allowed for foreigners who have valid stay permits and use the property as a residence.
• Key conditions often include:
  • The property must meet a minimum price threshold (varies by region and type of property based on ATR/BPN regulations, e.g. Jakarta houses and apartments typically in the multi-billion IDR range).
  • Use for personal residence, not for speculative trading.
  • One "main" property per family in some interpretations, with more flexibility if the holder leaves Indonesia.
• Leasehold (Hak Sewa / contractual lease): foreigners can enter into long-term leases (often 20-30 years, sometimes with extension options) over land or built property. This does not create a registrable land right in all cases, but is widely used, especially in Bali.

Foreign companies (PT PMA)

• A foreign-controlled company established in Indonesia (PT Penanaman Modal Asing - PT PMA) can hold:
  • HGB for commercial, industrial, and residential developments.
  • Hak Pakai for certain uses.
• This is the mainstream route for foreign developers, hotel operators, and large investors.
• The PT PMA must comply with:
  • Foreign investment law (Law No. 25 of 2007 and implementing regulations)
  • Business licensing via the OSS system (Online Single Submission)
  • Sector caps and restrictions in the Negative/Positive Investment List.

Mixed marriages and family situations

• Indonesian citizens married to foreigners should consider prenuptial or postnuptial agreements separating assets to preserve eligibility for Hak Milik.
• Without proper marital property arrangements, an Indonesian spouse holding Hak Milik may face restrictions or risk forced conversion/transfer if considered part of joint marital assets with a foreigner.

Risks of nominee arrangements

• A nominee structure typically uses an Indonesian individual or company to hold Hak Milik "for" a foreigner, backed by side agreements.
• Under Indonesian law and court practice:
  • Such structures can be considered invalid attempts to circumvent foreign ownership restrictions.
  • The nominee may be treated as the true owner, leaving the foreigner with weak or unenforceable rights.
  • There is potential exposure to administrative sanctions and, in extreme cases, criminal elements (for example, false statements in official documents).
• From a risk-management standpoint, nominee solutions are high-risk and should be avoided where compliant alternatives (Hak Pakai, lease, PT PMA) exist.

What is the standard process to buy real estate in Indonesia?

The standard process is to conduct due diligence on the land and seller, sign a preliminary agreement and pay a deposit, then execute the sale-purchase deed (AJB) before a PPAT, pay taxes, and register the transfer at the Land Office (ATR/BPN). Skipping due diligence or failing to register the deed is the most common cause of later disputes.

Step-by-step process

1. Initial checks and negotiations
   • Inspect the property and request copies of the land certificate (SHM/SHGB/SHP/HMSRS), seller ID, and latest land and building tax (PBB) receipts.
   • Confirm who is the legal owner and whether all heirs or shareholders agree to sell.
   • Agree on price, payment schedule, who pays which taxes, and key conditions (e.g. vacant possession, repairs, permit status).
2. Due diligence
   • Your notary/PPAT or lawyer should:
     • Check the certificate with the local Land Office (Kantor Pertanahan) for encumbrances (mortgages, seizures) and overlaps.
     • Verify zoning and permitted use with the local government (Dinas Tata Ruang / Dinas PTSP).
     • Check building permits (PBG, formerly IMB) and, where relevant, the building worthiness certificate (SLF).
     • Confirm no outstanding taxes or utility arrears and, for apartments, no unpaid service charges.
3. Preliminary agreement and deposit
   • Often documented as a binding sale and purchase agreement (Perjanjian Pengikatan Jual Beli - PPJB) or similar contract.
   • Usually signed before a notary, especially in developer off-plan projects.
   • Deposit is typically 10-30% of the purchase price, held by the notary or as agreed.
4. Tax calculation and clearance
   • PPAT calculates:
     • BPHTB (Bea Perolehan Hak atas Tanah dan Bangunan) - transfer duty, generally borne by the buyer.
     • PPh Final - final income tax on the sale, payable by the seller.
   • Payment receipts (SSB/SSTP/SSP) must be available before signing the AJB.
5. Signing the sale and purchase deed (AJB)
   • Executed before a PPAT (Pejabat Pembuat Akta Tanah), who is usually also a notary.
   • Both parties (or their properly authorized attorneys-in-fact) must attend with original IDs and documents.
   • PPAT reads and explains the deed, then both parties sign.
6. Payment and handover
   • Final payment is often made at or immediately before AJB signing, sometimes through an escrow arrangement with the notary.
   • Key handover and vacant possession can be defined in the AJB or a separate handover protocol (Berita Acara Serah Terima).
7. Registration at the Land Office
   • PPAT submits the AJB, tax payment receipts, and supporting documents to the local Land Office (ATR/BPN).
   • Land Office processes the transfer and issues a new certificate in the buyer's name.
   • Processing time can range from about 2 to 8 weeks depending on the office workload and completeness of documents.

Typical timelines

• Due diligence and negotiations: 1-4 weeks, depending on complexity and access to documents.
• From AJB signing to issuance of new certificate: often 1-2 months for straightforward transfers; longer if conversion, subdivision, or consolidation is involved.

What documents and registrations prove land ownership in Indonesia?

The primary proof of land ownership is a land certificate issued by the Land Office (ATR/BPN) that matches the seller's identity and is confirmed as clean in the Land Office records. Supporting documents such as tax receipts, building permits, and, for apartments, association records, are crucial for a comprehensive risk assessment.

Core ownership documents

• Land certificate issued by ATR/BPN:
  • SHM - Sertipikat Hak Milik (freehold title)
  • SHGB - Sertipikat Hak Guna Bangunan
  • SHP - Sertipikat Hak Pakai
  • HMSRS - Sertipikat Hak Milik atas Satuan Rumah Susun (strata title for apartments)
• Certificate details must match:
  • Owner's name and national ID (KTP) or company documents (akta pendirian, NIB).
  • Land area based on measurement and boundary map attached to the certificate.
  • Land location and registration number.

Supporting documents you should review

• SPPT PBB (annual land and building tax assessment) and payment receipts for the last several years.
• Building approval (PBG) and, if applicable, older IMB plus any letters integrating them into the new PBG regime.
• SLF (Sertifikat Laik Fungsi) for larger or commercial buildings.
• Utility bills (electricity, water, gas) and confirmation that they are paid up.
• Inheritance documents (for property inherited but not yet fully transferred) such as:
  • Heir statement (Surat Keterangan Waris) or court determination.
  • Deeds of distribution if several heirs are involved.
• For apartments/strata:
  • Evidence of membership and payment of building management fees.
  • Articles and rules of the owners association (PPPSRS).

Verification steps with authorities

• Land Office (ATR/BPN):
  • PPAT or your lawyer can request an official search or "information letter" regarding encumbrances and blockings.
  • For older or uncertified land, they may check the land book and maps if available.
• Village / subdistrict office (Kelurahan/Desa and Kecamatan):
  • Check local land records (letter C, historical tax records) for older land.
  • Confirm there are no known community disputes over boundaries.
• Local planning and building office:
  • Confirm zoning as per spatial plan (RTRW/RDTR).
  • Confirm building approvals and compliance.

What taxes and transaction costs apply to Indonesian real estate?

Key transaction costs are buyer transfer duty (BPHTB), seller final income tax (PPh Final), notary/PPAT fees, and often agent commissions, plus ongoing property tax (PBB). Combined, these can add several percent to the transaction value, so allocating them clearly in the contract is essential.

Main taxes and fees

Example cost breakdown for a typical secondary-market house

For illustration only, assume a house in Greater Jakarta sold for IDR 2,000,000,000 (2 billion):

• BPHTB (buyer): approx 5% x (Price - NPOPTKP). If NPOPTKP is 80 million, taxable base is 1.92 billion; BPHTB about 96 million.
• PPh Final (seller): 2.5% x 2 billion = 50 million.
• Notary/PPAT fee: say 0.75% = 15 million (often negotiable).
• Agent commission (seller): say 3% = 60 million.

Real allocations and numbers depend on local thresholds, updates in tax regulations, and your negotiated contract terms.

How do zoning, building permits, and strata titles work in Indonesia?

Zoning in Indonesia is governed by spatial plans (RTRW/RDTR) issued by regional governments, and any construction must comply with those plans and obtain a building approval (PBG) plus a building worthiness certificate (SLF) where required. For multi-story residential buildings, ownership is typically structured as strata title (HMSRS), which sits on top of the underlying land right.

Zoning and spatial planning

• National framework: Law No. 26 of 2007 on Spatial Planning and subsequent regulations.
• Each region issues:
  • RTRW - general spatial plan.
  • RDTR - detailed plan, sometimes integrated into online zoning maps.
• Zoning categories can include:
  • Residential, commercial, industrial, green/open space, mixed-use, etc.
  • Height limits, floor area ratios, and specific building guidelines.
• Before buying for development, you should obtain written zoning confirmation from the local planning office or PTSP (one-stop permit service).

Building permits - PBG and SLF

• Under the Job Creation Law (Law No. 11 of 2020) and Government Regulation No. 16 of 2021:
  • The traditional IMB (Izin Mendirikan Bangunan) system has been replaced by PBG (Persetujuan Bangunan Gedung) - building approval.
  • Completed buildings require an SLF (Sertifikat Laik Fungsi) to confirm fitness for use, especially for commercial and multi-story structures.
• PBG and SLF applications are now generally integrated into the OSS (Online Single Submission) system, especially for businesses.
• Common risks:
  • Existing buildings without proper permits or with permits that do not match the actual structure.
  • Extensions or additional floors built without updated approvals.

Strata title (HMSRS) for apartments

• Regulated under Law No. 20 of 2011 on Flats and implementing rules.
• Key features:
  • You own a unit (with its own HMSRS certificate) and a proportional share in common areas (land, corridors, facilities).
  • The unit's legal status depends on the underlying land right (Hak Milik or HGB) held by the building's main title.
• Developers must:
  • Obtain proper land rights and permits.
  • Create and register strata titles for each unit after construction.
  • Support formation of the owners association (PPPSRS).
• When buying an apartment:
  • Check the HMSRS certificate for the unit.
  • Review PPPSRS rules, management contracts, and service charges.
  • For foreigners, verify whether the project and unit meet requirements for foreign ownership (minimum price, zoning, permitted holder category).

What are the most common risks and due diligence issues in Indonesian real estate?

The most common risks are unclear or disputed land titles, unregistered inheritances, overlapping land claims, non-compliant buildings, and artificial structures like nominee arrangements for foreign buyers. Thorough due diligence with local professionals significantly reduces these risks.

Title and ownership risks

• Unclear inheritance: property still in the name of deceased owners without proper heir documents or transfer deeds.
• Multiple heirs: some heirs may not consent to the sale, creating future claims.
• Overlapping certificates: two or more certificates or claims covering the same or overlapping land area.
• Mortgages or encumbrances: property pledged as collateral without disclosure.
• Uncertified land: land only supported by village letters or tax records, not converted into an ATR/BPN certificate.

Regulatory and permit risks

• Zoning non-compliance: property used or built for purposes not allowed under the spatial plan.
• No or incorrect PBG/IMB: building constructed without approval or with an approval that does not match the actual structure.
• No SLF for larger buildings: which can create problems for insurance, financing, or enforcement of commercial leases.
• Environmental issues: in some areas, absence of required environmental permits (AMDAL, UKL-UPL) can affect industrial or tourism projects.

Contractual and practical risks

• Nominee and side agreements: difficult to enforce in court and may be considered contrary to mandatory law.
• Off-plan purchases: developer delays or failure to complete the project; lack of escrow protection or transparent milestones.
• Boundary disputes: neighbors disagree with boundary markers, especially in rural or rapidly developing areas.
• Community and customary rights: in some regions, customary (adat) rights may coexist with state-recognized titles, leading to disputes.

Key due diligence actions to mitigate risk

• Use a reputable notary/PPAT and, for complex deals, a real estate lawyer independent of the seller or developer.
• Order a formal search and confirmation from the Land Office for title status and encumbrances.
• Engage a licensed surveyor to confirm boundaries and land area on the ground, especially for large or irregular plots.
• Check zoning and permits in writing with the local PTSP / planning office.
• Review all tax records, including PBB and relevant income tax or VAT treatment.
• For apartment or commercial buildings, review management contracts, service charge history, and association minutes where possible.

When should you hire a lawyer or other real estate expert in Indonesia?

You should hire a real estate lawyer and other experts when the property value is significant, the structure involves foreign ownership, or there are any signs of title, zoning, or inheritance complexity. For straightforward small transactions, a diligent notary/PPAT may be sufficient, but you must still insist on proper due diligence.

Situations where a lawyer is strongly recommended

• Foreign buyers or sellers:
  • To structure Hak Pakai, lease, or PT PMA arrangements correctly.
  • To avoid illegal nominee structures and ensure compliance with immigration, investment, and tax laws.
• Commercial and industrial projects:
  • Complex zoning, environmental, and licensing requirements.
  • Multiple contracts (land acquisition, JV agreements, construction, leases, financing).
• Large land banks or development sites:
  • Risk of overlapping claims and customary rights.
  • Need for staged acquisitions and conditional contracts.
• Properties with inheritance or family disputes:
  • Multiple heirs or missing heirs.
  • Old certificates and unclear historical transactions.
• Off-plan purchases and joint ventures:
  • To negotiate balanced PPJB, escrow arrangements, and termination clauses.
  • To protect minority or foreign partners in JV structures.

Role of other professionals

• Notary/PPAT: drafts and executes the AJB and other deeds, calculates taxes, submits documents to ATR/BPN. Choose one with strong local knowledge and a reputation for thorough checks.
• Tax advisor: helpful where you have cross-border elements, corporate structures, or multiple properties.
• Licensed surveyor: essential for boundary confirmation, subdivision, consolidation, or where you suspect overlap issues.
• Architect/engineer: for assessing building quality, renovation feasibility, and compliance with PBG/SLF.

What are the next steps if you plan a real estate transaction in Indonesia?

Your next steps are to clarify your ownership options (based on your nationality and purpose), assemble the right local professional team, and structure the deal with clear contracts and full registration. Acting methodically at the start will save you significant time, money, and disputes later.

Actionable checklist

1. Define your goal and profile
   • Are you buying to live, invest, or develop?
   • Are you an Indonesian individual, foreigner, or company (local or PT PMA)?
2. Choose the appropriate legal structure
   • Indonesian individual: Hak Milik, HGB, or strata as appropriate.
   • Foreign individual: Hak Pakai or lease, possibly combined with PT PMA if investing at scale.
   • Corporate investor: PT or PT PMA with HGB/Hak Pakai, subject to sector rules.
3. Assemble your advisory team
   • Select a notary/PPAT in the property's area with strong reputation.
   • For material deals, add an independent real estate lawyer and, as needed, a tax advisor and surveyor.
4. Screen properties and sellers
   • Request copies of certificates, IDs, and latest PBB before serious negotiation.
   • Walk away from sellers who refuse reasonable document disclosure.
5. Conduct formal due diligence
   • Run title checks with ATR/BPN and local authorities.
   • Verify zoning, permits, and building compliance.
   • Assess tax and cost implications with your advisors.
6. Document and close correctly
   • Use clear written agreements (PPJB, leases, JV contracts) aligned with your risk profile.
   • Execute the AJB before PPAT, pay required taxes, and ensure registration is completed.
   • Keep certified copies of all key documents and tax receipts.

By following these steps and using qualified local professionals, you can navigate Indonesia's real estate system in a way that is both legally compliant and commercially effective.