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Buying land and property in Indonesia


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#1 yohan

Posted 08 November 2009 - 11:09 AM

View Postdrbruce, on 08 November 2009 - 05:46 AM, said:

....There have been a few calls in the last year to liberalize the laws so that foreigners could, at the least, purchase condos or apartments.
....If there's some interest, I could write some more about this topic later.
Thanks for your information. I understand, it is in general not possible in Indonesia for a foreigner to buy a condominium in his/her own name like in Thailand,  Malaysia or Philippines.

I am sure, everybody here in this forum is interested to read some more information from you about your daily life in Indonesia as you are a foreigner living there since 19 years with Indonesian family. A remarkable long time.

Compared to other Asian countries, there is not much information about Indonesia available on the internet, it's not really such a well-known and popular destination.

#2 drbruce

Posted 08 November 2009 - 01:53 PM

About property. This is just a short post as I have to get some sleep as tomorrow is a full day of teaching, yard duty and an hour junior high staff meeting about the exciting topic of new report cards.

The most common approach for the foreigner (based only on word of mouth, I don't have any stats on this) is the nominee system. There are a variety of ways to do this, but basically it involves a foreigner getting an Indonesian to purchase some land or property with it being in the Indonesian's name. The foreigner and the Indonesian then have some agreement, usually notarized, that gives the expat power of attorney over the property or having the purchase price listed as a loan, or an agreement to live on the land for x amount of years. As I noted, there are probably as many variations on this theme as there are covers of Elvis songs. The problems with this are many although the expats who have moved into the property market in a big way (and in a very murky way legally) often argue that there are no problems with this type of agreement. First problem is that the Indonesian who is often your "best friend, really like family" may decide to sell the property or take out a loan on it or just kick you out. As the Indonesian legal system doesn't recognize this approach, it's a risky venture. I always try to talk folks out of it when they ask for my advice, but it's like telling someone you don't like his future bride.

So this is the first way to "buy" some property. There are other more reliable ways that I'll write about when I have more time - probably next weekend.

#3 drbruce

Posted 14 November 2009 - 04:47 AM

Another way to get property in Indonesia comes under the title of Hak Pakai: Right of Use.

Expats that follow this route have the right to use land that is either public or private. The right extends for a defined period of 25 years, and can be renewed for another 20 years. Indonesian citizens and companies and foreigners and foreign companies may use Hak Pakai. The land title is given to the government and the expat is given a Hak Pakai certificate. This right cannot be transferred or sold to another unless explicitly noted in the agreement. Many expats use the Hak Pakai and argue that it gives them the same rights as an Indonesian citizen in terms of use and sale. It is further argued that the Hak Pakai certificate takes precedent over all other titles on the property. As always with property issues, I advise potential expats to check with a local lawyer before entering into any agreement. The good thing about Hak Pakai is that it is legally recognized, unlike the nominee agreement. I also advise folks to get a good translation of all documents so that they know just what it is that they are signing. Foreign consulates always have a list of recognized translators that are trustworthy.

Because my wife is an Indonesian citizen, we (or rather she) owns the property where we live so we haven't used Hak Pakai, but I do know expats that have, and they seem satisfied with the Hak Pakai option.

There are still a few more options that I'll write about later.

#4 yohan

Posted 14 November 2009 - 03:04 PM

Thank you for your good information. I think, it is the first time I read about that all in this forum.

Unfortunately, it seems you are the only member of this forum who is living in Indonesia for such a long time, and it seems you have good impression so far about Indonesia generally.

For sure, there is no property market for the foreigner in Indonesia, except rent and lease. Even no condominium for sale.

Did you travel around all Indonesia, or have you always been in the same place?

#5 drbruce

Posted 15 November 2009 - 03:23 AM

About property, Yohan - there is a huge market in Bali despite that fact that foreigners can't actually own land or a house. In fact, it has become so expensive now to "buy" land in Bali now that if I was just starting out, I couldn't afford to build here now unless I had a large bank account or a well paying job. There are many real estate agencies, often run by foreigners with Balinese or Indonesian partners, selling property all over the island for prices generally in excess of USD 100,000. I was just looking at a real estate website today that had many properties in excess of 200,000 Euros.

I have a number of websites and blogs about Bali and Indonesia and usually receive 5-10 inquiries a week about moving to Bali. I eventually wrote an eBook about moving to Bali just to save some time and try to pick up a little cash and was surprised at the number of people that bought the book and then continued to correspond with me while they were in the process of moving over here.  Personally, I would never live in the areas that are most popular with the new arrivals, but that's my own bias - living in expat ghettos.

I've had a house in Bali since 1990, but I've worked on several other islands, and had a house on one of the less visited islands for five years until we sold it last year. I've traveled around to all of the major islands with the exception of Sumatra and Kalimantan.

My money changer in Bali recently told me that there are over 20,000 foreigners living in Bali now which kind of surprised me, but most of that is down in the tourist areas of the south and the Ubud area which is particularly popular with Europeans with money. The area where I live has a tourist strip along the beach about 10 km west of me and that area is beginning to fill up with foreigners, especially Dutch retirees.

I'm just getting ready to retire (once again as I retired last year, but returned to work when I was asked to come back to help out as my old international school was transforming into a hybrid Indonesian school. Fortunately, I only have another month to go on my contract. Anyway, I plan on just hanging out with my children and wife, doing some fishing, and writing a few more books.  

Yes, generally I enjoy living here. People are friendly, life is relatively cheap, the weather is pleasant, and due to the fact that I'm married to an Indonesian woman and have lived in the same neighborhood for almost two decades, I don't get bothered much by anyone. Everyone in my neighborhood knows me, I have good relationships with the local businesspeople and the bankers, and I only deal with the government people when absolutely necessary. Having a good wife is really a key to living here as far as I'm concerned - she takes care of all the routine stuff that I don't like dealing with, and she keeps me in check when I get irritated by the little issues of daily life in a developing country.

#6 กำนัน

Posted 15 November 2009 - 06:59 AM

View Postyohan, on 14 November 2009 - 03:04 PM, said:

Unfortunately, it seems you are the only member of this forum who is living in Indonesia for such a long time
I want to take the opportunity to respond to this...
It's a chicken/egg situation. Let me use Javel's thread about "no man's land" at the Vietnam border as an example. It's the sort of thread that gets expatriates signing up to post their experiences at the border...
This thread you are reading now is also the sort of thread that gets people interested in signing up and posting in the long term...

It takes time... and it's not easy. Like a quality hardwood, OE is taking it's time to develop. I think that's a good comparison. The forum is manned almost constantly by myself or one of the moderators, there is no spam and it's a well maintained forum with balanced moderation. This is paying great dividends in the overall quality of our membership and the high quality of the information that is being exchanged.

#7 drbruce

Posted 22 November 2009 - 02:13 AM

Here is another option for those folks wanting to "purchase" property in Bali. This one is called Hak Sewa (Right to Rent). This right allows a foreigner or Indonesian the right to rent land that is owned by another party for the purposes of building or residency. This right is not registered at the land office so there is no official certificate that accompanies it. The time period for this option is generally 25 years, and it can be renewed. The Indonesian owner of the land keeps the certificate and the expat keeps the original rental document and a photocopy of the land certificate. We've used this approach several times when doing land transactions with foreigners and haven't had a problem yet.

#8 yohan

Posted 22 November 2009 - 03:01 AM

View Postdrbruce, on 22 November 2009 - 02:13 AM, said:

Here is another option for those folks wanting to "purchase" property in Bali. This one is called Hak Sewa (Right to Rent). This right allows a foreigner or Indonesian the right to rent land that is owned by another party for the purposes of building or residency. This right is not registered at the land office so there is no official certificate that accompanies it. The time period for this option is generally 25 years, and it can be renewed. The Indonesian owner of the land keeps the certificate and the expat keeps the original rental document and a photocopy of the land certificate. We've used this approach several times when doing land transactions with foreigners and haven't had a problem yet.
This sounds not bad at all if you construct a very cheap housing on it, which has no value at all ready to move out anytime on request. Something like a container housing? Or for a retired foreigner, who might be in his 70s. But how much is the 'lease(?)' Same as rent or really cheaper? But not registered, so this is not a lease, not a binding contract. - It sounds like to pay nothing else but a monthly (?) rent. And after only 25 years it 'could' be extended. So what happens then with the building on it, if it is a good construction for longer than 25 years and still in good condition?

Do you see any advantage for the person who is renting such a land? I see only advantages for the owner, has he any legal obligation to respect these 25 years or can he demand his land back even much earlier for his own use? Even if he is receiving the 'rent' on time?

Anyway, so far I understand out of your postings, this one and the previous ones, it is somewhat not really necessary to buy anything as a foreigner, as there are some generally accepted legal standard procedures to go around true ownership of land for many years or even decades. It seems in Indonesia people are trustfully and not so much into cheating in case of such transactions.

Maybe somewhat different to Thailand, where all and everything is legally seen not really much stable.

May I ask, did you live in other Asian countries for a longer time, or always only in Indonesia?

#9 drbruce

Posted 22 November 2009 - 04:07 AM

Yes, Yohan, the lease is legally binding and can be written to include various provisions. Just as an example, in one that we did, we provided for the sale of the land to the owner's son (an Indonesian citizen) once he becomes of legal age. The renter is liable for property taxes, etc. There can also be a provision in the lease document to extend the contract after the original term is finished. Prices vary depending on the location of the land, buildings that are already on it, etc. The lease is registered with the government agency in charge of land, but because the land is not being sold, the owner keeps the original land documents.

In my opinion, if I was a foreigner who was not married to an Indonesian and already middle-aged, this is the way that I would go. Any buildings on the land go to the owner if the contract is finished and not renewed. I know expats that have negotiated leases with this in mind - so as to get a discount. For example, the Indonesian owner gives them a deal on the price, and the expat agrees to build say a five room house. The owner can look at that as something extra for him if the expat is already up in years.

As to your other question, I lived in Pakistan for four years, but the family stayed in Bali so I went back and forth on vacations. Bangkok was my stopover in those days so I spent a fair amount of time in the city but usually only for a few days at a time.

#10 yohan

Posted 22 November 2009 - 04:54 AM

Thanks for all these interesting information.

It really seems something changed in Indonesia during the last 10 years or so.
I never made it over to Indonesia, due to time problems, always only Japan, Thailand, Philippines, but you cannot be everywhere.

I should visit it, despite most locals in Malaysia, in Kuala Lumpur especially are telling me, nothing there worth to visit.
But they all refer to Medan, Sumatra, not far away by ferry or short flight.

I think, this thread should be pinned in the Indonesian section, it's really containing important valuable information.

Thanks to DrBruce in Bali!


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