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Foreign Land Ownership in Indonesia

Foreign Land Ownership, sponsors and nominees in Bali and Indonesia

Foreigners cannot own land freehold in Indonesia. They can buy and sell land under renewable title deeds Hak Pakai (HP or Right to Use) and Hak Guna Bangunan (HGB or Right to Use for Building)

Freehold title of land in Indonesia is a title known as Hak Milik (HM)which means "right to own" and this is not available to foreigners or anyone who is not an Indonesian citizen.

Foreigners can, however, lease land under Hak Pakai or "right to use" title deed.

Here we look at the Indonesian constitution and the Indonesian agrarian law act that define these laws.

See also:

Foreigners cannot own freehold land title (Hak Milik) in Indonesia

Whatever anyone tells you foreigners cannot own land in perpetuity in Indonesia. They can hold a renewable ownership title or lease it for many years, but they cannot fully own it.

There are people who are buying land using nominee ownership, this is an arrangement to try and get around the law and as such may be declared illegal in a court of law.

In article 33 section 3 of the Indonesian constitution which states The land, waters and natural wealth contained within them are controlled by the State and shall be utilised to increase the prosperity of the People, in other words ”the land and seas of Indonesia are for the benefit of Indonesians.”

Can foreigners have freehold title?

There is no freehold title in Indonesia, the nearest thing is 'Hak Milik' (Right of Ownership) and even under this title the government can take the land off the owner if they are not using it “for the good of the Indonesian people” or if the government needs it for something else. It can even be taken off them if they don't use it within 12 months of purchase.”

Agrarian Law Act Indonesia

How can a foreigner own land?

It is all laid out very clearly in article 9 of the Agrarian Law Act of 1960 which says Only Indonesian citizens may have the fullest relation with the earth, water and air space, by 'fullest relation' they mean ownership.

Article 21 is perhaps a little more emphatic Only an Indonesian citizen may have rights of ownership. So foreigners, and that includes any Indonesians holding non Indonesian citizenship (dual nationality is illegal for Indonesians), cannot own land in Indonesia.

Everywhere we see signs advertising freehold title but such a title, if there was one, is available to foreigners.

Inheriting land in Indonesia

What if someone gives land to a foreigner?

Article 26 clause 2 says Each sale and purchase, exchange, gift, bequest by will and other acts which are meant to transfer the right of ownership directly or indirectly to a foreign national .... are not valid … and that all payments which have been received by the owner may not be reclaimed.

Note the word “indirectly” which suggests that nominee ownership or other strategies to circumvent the spirit of the law are illegal.

Foreigners can lease land under Hak Pakai - right to use title

The Agrarian Law Act states a number of different types of title. One is called Hak Pakai (Right to Use) and here it is clearly stated that foreigners can lease land for 25 years and this period can be extended. This is the safest arrangement.

Ownership of land using a sponsor

Many foreigners have bought land using a nominee owner, a sponsor. The land is bought in the name of a local owner (often the driver which is NOT a safe arrangement). the nominee is then controlled by a loan agreement to cover the money, a power of attorney to allow the foreigner to sell the land and the land certificate is held by the foreigner or his/her lawyer in his/her safe.

In several places the Agrarian Law Act mentions the control of land ownership and Indonesian courts will probably consider these legal documents simply a ruse to get around the spirit of the law. They might decide that foreigners cannot own land but also cannot CONTROL the ownership of land.

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Copyright © Phil Wilson May 2009
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