To put things in order, let us first examine the laws concerning foreign property ownership in Indonesia. There are basically two fundamental rulings on this issue – the Basic Agrarian Law of 1960 (UU Pokok Agraria Tahun 1960) and Government Decree #41 of 1996.
The Basic Agrarian Law is the main law concerning land ownership in Indonesia and includes a section about ownership by foreign individuals and institutions. According to the law, a foreigner who resides in Indonesia is allowed to own a residential property built on land with a ‘Hak Pakai’ (right of use) title. Indonesian law recognises several land titles. The most widely-used land titles are:
Hak Milik’ (freehold) – exclusively for Indonesians;
Hak Guna Bangunan (right to build) – for companies and institutions;
Hak Pakai – for companies and institutions, including foreign individuals.
Government Decree #41 stipulates that the maximum period for ‘Hak Pakai’ ownership is 25 years, but this can be extended for another 20 years. It also adds that a foreigner can buy a strata-titled residential property, which is built on land with a ‘Hak Pakai’ title.
On this basis, a foreign individual is legally allowed to buy, for example, a house that is built on a single parcel of land, but they must convert the title of the property to a ‘Hak Pakai’ title to comply with the laws.
However, it is extremely difficult for foreigners to buy high-rise residential properties, such as condominiums, as almost none of these projects are built on land with a ‘Hak Pakai’ title and it is difficult to convert the title of such land to a ‘Hak Pakai’ title, because the land is owned by many individuals (common ownership) and not by one sole individual, as it is in landed housing projects.