Ownership & title - Freehold Leasehold

Ownership & Title – Freehold & Leasehold

The freehold title (“hak milik”) is available for Indonesian citizens only. Foreigners can own either leasehold (“hak sewa”) or so called right of use titles (“hak pakai”) in terms of property ownership.

To qualify to buy a leasehold title in Indonesia, nothing else than a valid visa is required at the time of signing the leasehold deed. A tourist visa is sufficient. To buy and own a right of use title, a foreigner needs a valid stay permit (called “KITAS” or “KITAP”) at the time of buying the property and when selling it again. A retirement visa is the simplest way to obtain a stay permit but one needs to be at least 55 years old. 

Leasehold terms come in various lengths and terms are negotiable. Typical is a 25-year lease, but we have seen 30 years or more, even 99-year terms. The law doesn’t stipulate a maximum term for a leasehold period, so it’s up to the parties to define the term. It’s important that you stipulate and define your lease extension term and it’s worth getting a solid wording here. Talk to one of our experts for advice or consult an experienced notary or lawyer on property ownership that fits you.

The right of use title is extended to foreigners with a residential permit and is typically reserved for land with a building on it and not just raw land. Here is how it works:

The current status of the freehold property you are acquiring will be replaced by a right of use title or a right of use title will be established on top of the freehold title and yes, it will be bearing your name and you can pass it on to your heirs. There are limitations with regard to the price and size of property ownership that qualify for “hak pakai”. Ask your notary or lawyer about the current regulation.

Once your right of use title is ready, it will be issued for the first term of 30 years. Before the end of the term, you are entitled to extend the title for the second term of 20 years and after that, you can renew it again for another 30 years. The extension is granted by paying a tax to the government.

Here is the good news: if sold and transferred back to an Indonesian citizen, a “hak pakai” title can be converted back to freehold (“hak milik”). Thereby, as a foreigner, you enjoy the same value appreciation of a freehold title as an Indonesian citizen. Unfortunately, this option is little known among foreigners.

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