This content is from: Local Insights

Indonesia: Foreigners’ property rights

Late last year, President Joko Widodo’s administration issued a government regulation clarifying the rights of foreigners to own properties in Indonesia

Oene MarseilleEmir Nurmansyah

Late last year, President Joko Widodo's administration issued a government regulation clarifying the rights of foreigners to own properties in Indonesia.

The new regulation explicitly allows qualified foreigners to own a qualified dwelling for residential purposes. The title conferred to these foreigners is known as the Right-to-Use title. This title is valid for a 30-year period, which may be extended twice for a maximum validity period of 80 years.

The title may be bequeathed to another qualified foreigner.

A qualified foreigner is defined as a non-Indonesian citizen who is residing in Indonesia, holds a valid stay permit in Indonesia, and their presence in Indonesia provides a benefit or is done in the context of conducting business, working, or investing in Indonesia.

A qualified dwelling includes a single residential house built on Right-to-Use land or a single residential house with the Right-to-Use title, built on land with the Right-of-Ownership title. An apartment unit built on land with the Right-to-Use title may also qualify.

If the foreigner ceases to qualify to hold properties in Indonesia, they are required to transfer the title to a qualified foreigner or an Indonesian party.

The new regulation also contains a curious provision stating that foreigner may only hold title to 'new' properties. It is unclear if this provision means that foreigners may only purchase newly-built properties directly from developers. This point may be clarified in subsequent amendments or future implementing regulations.

Additionally, the regulation does not address the more practical consideration of whether the Right-to-Use title conferred in this context may be used as security for financing. It is noteworthy that the Indonesian agrarian law recognises a version of the Right-to-Use title, which generally may not be used as a security. However, this version of Right-to-Use has a different validity period from the Right-to-Use introduced by the new regulation.

The new regulation has been effective since late December last year.

Oene Marseille and Emir Nurmansyah

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