Successful Property Investment in Indonesia: A Brief Overview | Wealthprint

Property investment is a lucrative venture offering extensive financial security and long-term growth potential. Indonesia, a respectable country recognised for its rich culture, breathtaking scenery, and thriving economy, provides an excellent chance for property investors. If you are planning to upgrade your property portfolio in Indonesia, It's vital for you to thoroughly understand the nation's property ownership legal laws and regulations. 

Suppose you are a foreign investor planning an investment to earn big and ease your future. In that case, this post is for you as we give you a detailed process for a successful property investment in Indonesia.

All about Property Investment in Indonesia 

Indonesia's rising economy and strategic position make property investment a rewarding opportunity. Investors can benefit from lower property prices, higher rental yields, and government tax incentives. Jakarta, Bali, and Surabaya are among the top investment destinations, each with advantages. Foreign investors can invest using long-term leases and nominee agreements, ensuring local legislation conformity. Indonesia's thriving tourism industry and growing middle-class fuel demand make it an appealing market for residential and commercial buildings.

Different Types of Property Ownership in Indonesia

There are different types of Property Ownership modules present in Indonesia that make your property investment in Indonesia campaign successful: 

1. Leasehold Ownership 

Leasehold ownership gives you the right to use and occupy a property for a set period, often 25 to 30 years, with the opportunity to extend. This type of ownership is particularly popular among international investors due to its ease of access. In this ownership module, the property must be returned to the actual owner right after the lease ends. It is also available to foreigners, making it the best choice for non-Indonesian investors. Ideal for residential, commercial, or tourism-related properties where long-term, but not permanent, ownership is desired.                                

2. Freehold Ownership (Hak Milik)

Freehold ownership guarantees complete and indefinite rights to the land and its constructions. This ownership is limited to Indonesian citizens, making it inaccessible to foreign investors. Foreign investors, however, can continue to profit. The most extensive property rights allow for the property's complete use, alteration, and transfer. However, they are restricted to Indonesian natives, making them less accessible to overseas investors. These rights are preferred for long-term residential needs, estate planning, and stable investment. It is best suited to achieve a successful property investment in Indonesia. 

3. Right to Build <Hak Guna Bangunan>  (HGB)

In this module, a type of land right enables the holder to construct and own buildings on someone else's land for a specific period. This is generally granted for 30 years and can be extended for more than 20 years. HGB offers rights to use and develop the land, but ownership of the land remains with the owner or the state. Foreign entities can use it under particular conditions, and it is frequently used for commercial development. It's ideal for enterprises, industrial ventures, and commercial real estate projects.

Understanding these types of property ownership helps investors make informed decisions based on their investment goals, duration, and legal restrictions.

Key Differences Between Leasehold and Freehold/HGB

Parameters	Leasehold	Freehold	Right to Build (HGB)
Requirements	Available to anyone under the Hak Pakai (right of use).	It is only available to Indonesian nationals.	HGB is available only through a PT PMA (foreign-owned company) with specific capital requirements.
Duration	It is up to 80 years, usually starting with a 25-30 year period.	The total time duration is 80 yrs.	The initial time frame is 30 years.
Extensions	Extensions are negotiated during or at the end of the lease.	NA	A new HGB certificate can be acquired.
Setup	This simple process requires a passport and POA if signing from overseas.	It requires a company set up for PT PMA, allowing  100% foreign ownership with two directors.	It requires a company set up for PT PMA, allowing  100% foreign ownership with two directors.
Tax	10% lease tax, 1-1.5% notary fee	5% buyer's tax, 2.5% seller's tax.	5% buyer's tax, 2.5% seller's tax.
Payment	It Involves deposit, land lease agreement, and building agreement.	Freehold includes deposit, land transfer, and building agreements.	HGB Includes deposit, land transfer, and building agreements.
Visas	Not provided	Only applicable for employees.	Available for investors and employees.
Income Taxes	20% for foreigners, 10% for residents	Corporation tax 0.5% up to 4 billion IDR turnover.	Corporation tax 0.5% up to 4 billion IDR turnover.
Resale	Can sell lease at any time, subject to 10% tax on agreed value.	Sale of company, 2.5% land transfer tax for the seller.	Sale of company, 2.5% land transfer tax for the seller.

Best Tips to Consider for a Successful Property Investment in Indonesia 

While planning for a successful property investment in Indonesia, keep these pointers in mind: 

• Understand the Indonesian real estate market 

• Make a Thorough Research

• Legal and Regulatory Considerations 

• Diversification and Risk Management

• Adequate financing options 

• Taxation Implications 

Final Thoughts

Property investment in Indonesia presents opportunities but requires numerous crucial steps and a deep understanding of local dynamics. By following the steps mentioned above and leveraging the core expertise of Wealthprint professionals, you can make informed, great investment decisions that lead to long-term success. 

Most Common Questions About Property Investment in Indonesia

1. What happens when my leasehold expires?

Upon expiry, you can negotiate a new lease agreement. This is essential for long-term investments, especially those looking beyond the initial lease term of up to 80 years.

2. Can leasehold properties convert to freehold?

No, leasehold properties cannot convert to freehold. The landowner determines the property's status, and in regions like Bali, the landowner generally retains freehold.