Get Possession of Indonesian Property in Several Steps
June 22, 2020
Becoming a property owner in Indonesia is not a very difficult thing to do. Although, there are some tricky parts that you won't really meet in Europe. Some rules are more typial to the Asian market. What should you know before buying property on the Indonesian market? How many documents do you need to prepare beforehand? Can you buy realty without coming to Indonesia? Let's talk about it in the new article.
Non-residents cannot simply buy a flat or a villa in Indonesia. But the market of this country offers several ways to registrate property as a non-citizen.
Types of ownership for foreigners
1. Hak Pakai ("right to use"). When a foreign buyer purchases property this way, they get a registered certificate. Non-residents get an opportunity to use their property rightfully, and their rights are protected by law.
A registered certificate is granted first for 30 years, then it can be renewed for another 20 years, and then for another 30 years. In total, the validity period reaches 80 years. This form of ownership is recognized as the most secure for private buyers from other countries. It can only be applied to one real estate unit. Moreover, the size of the land plot on which it is built cannot exceed half a hectare.
The main requirement for a buyer who wants to buy a property in this way is a work visa to Indonesia (KITAS). However, please note that this method is only suitable for those who are going to live permanently in Indonesia. After all, if you move out of the country, you must transfer your rights to another person within one year. Otherwise, the state seizes the property without compensation.
2. Hak Milik ("unconditional right to property", freehold). According to the laws of Indonesia, ownership of land in this country can only be held by the citizens. But even here there is a certain scheme in which a foreigner can become a full owner of real estate. A foreign investor signs a notarized loan agreement for a citizen of Indonesia, the collateral for which is the property being purchased.
The disadvantage of this method is obvious: the real owner of the property remains an Indonesian citizen. Therefore, this path is mainly used by those who plan to obtain a passport of Indonesia in the future and re-register the property for themselves.
3. Hak Guna ("right to build"). This method is suitable for companies registered in the territory of Indonesia. It allows a legal entity to own several properties or build them.
This right is granted to the company for a period of 30 years, which can then be extended to 80 years. The company can thus sell land or real estate to other persons, transferring the rights to this property.
4. Hak Sewa ("lease" or leasehold). this method involves entering into a regular lease agreement. It is usually notarized, but not registered with the state authorities. This is how it differs from previous forms of ownership.
Step-by-step diagram of a standard real estate transaction
This scheme concerns the forms of ownership of real estate Hak Pakai, Hak Milik and Hak Guna.
Step 1. Checking the property
Once you have selected the property you are interested in, you need to conduct Due diligence of the property. To do this, the realtor will requests from you the following documents:
the last five receipts for payment of tax on land and buildings and confirmation of payment;
the original certificate of land;
original construction permit;
confirmation of payment for water, electricity, telephone;
if you have a mortgage, a letter from Royal Bank;
a copy of the ID of the Directors and representative, if the seller is a company;
minutes of the meeting of participants with the decision to sell, notarized if the seller is a company.
The buyer in turn provides the following papers:
Passport / ID;
Copies of the ID of directors and representatives, if the buyer is a company;
All documents for the company, if the buyer is a company.
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Step 2. Executing of conditional agreement of purchase and sale
The seller and buyer usually enter into a conditional purchase and sale agreement (CSPA) before transferring the land. CSPA is usually considered as a pre-contract agreement for registration of a long-term lease of a land plot.
In some cases, the CSPA requires an advance payment and/or the seller to meet certain conditions. The deposit amount is not set, it all depends on specific agreements.
Stage 3. Registering the purchase and sale agreement
Contract of sale (known as Akta Jual Beli (AJB)) the buyer and seller sign before the authority that registers the land documents (Pejabat Pembuat Akta Tanah (PPAT)).
The contract specifically specifies the following points:
full details of the buyer and seller;
the certificate of a long-term land lease;
application for transfer of land from the seller to the buyer;
seller's guarantees;
repeated measurement of the land plot;
a statement that a long-term lease on land does not violate the land title provisions;
regulation on dispute resolution.
Step 4. Making a payment
After Due Diligence and verification of all documents, the seller and buyer pay their taxes and submit documents about their payment to the Land Deed Official, where the necessary actions for reissuing documents begin.
Immediately after signing the purchase agreement, the buyer pays the remaining amount of the transaction. The method of transferring funds is discussed separately. The same applies to the timing of payment of additional expenses.
Stage 5. Registration of ownership rights
After signing the documents, a certificate of transfer of long-term lease rights and the documents attached to it must be made within seven days. Registration is managed by Pejabat Pembuat Akta Tanah (PPAT). The buyer eventually gets:
an offer to registrate the certificate of transfer of a long-term lease right;
the script of the transfer report;
scripts of the latest land and construction tax receipts and proof of payment;
the original certificate of land;
confirmation of payment of all necessary taxes;
a copy of the seller's and buyer's IDs.
The entire transaction usually takes a month. And after signing the documents, the seller transfers the long-term lease right to the land to the buyer, while the remaining documents are still being prepared.
Can I seal the deal remotely?
Remote transaction is possible. You need to issue a power of attorney to a lawyer, who performs all the necessary actions.
