What The Rules Are All About: Owning Property in Indonesia

What The Rules Are All About: Owning Property in Indonesia
Image by Dikaseva on Unsplash.

Expat bars in Bali are treasure troves of secret knowledge and hidden wisdom. It’s where the mysterious oracles live. If you need an answer to any question, anything at all, then all you need to do is head to the nearest expat bar and very politely ask the guy making the most noise.

It’s a bit risky mind you as he might take offense and verbally abuse you for no reason whatsoever. But that’s his right OK, because he’s been on the island for the longest of times and he’s got the attitude and the love handles to prove it!

The oracle is sure to know the best of ways to illegally extend your visa, avoid paying any and all taxes and where to buy the cheapest Bintang in town. And for sure he knows the best way to buy a house. Wink, wink. He doesn’t actually own one himself because he says he prefers to rent but he sure as hell knows the law. All of it!

Actually, he thinks he knows, but he doesn’t so don’t take his merry advice. Not unless you enjoy looking over your shoulder and living in a constant state of paranoia or you’ve got more money than sense.

There’s no denying that property is big business in Bali. This island paradise seems to have it all; amazing architecture, beautiful beaches, picture postcard places. But it’s risky right? I mean, we all know the laws don’t make sense and they’re made to be broken, right? Everyone says foreigners don’t have a legal leg to stand on, right? 

Wrong!

If you listen to the oracle you’re setting yourself up for a fall.

That’s why it’s better to find professionals who know the real story about real estate in Bali.

One of the first things to understand is there are foreign ownership rules and regulations. So get to know what they are. They may not be exactly the same as you’d find in your own country, but we’re not in your country now are we, we’re in Indonesia. And if you don’t like the rules here don’t play.

The oracle, however will try to convince you its OK to bend the rules, hide them under a blanket and lock them in the closet. But it’s not OK. It’s really not OK. You wouldn’t consider doing it at home so why try and do it here. The invisibility cloak the oracle speaks so highly of doesn’t exist. It never did.

Indonesia’s Agrarian Law called Undang-Undang No.5 Tahun 1960 article 16 (1) is based on the Indonesian Constitution. It covers seven kinds of ownership structure but for our purposes only four of these apply. These are:

1.       Hak Milik or Freehold

2.       Hak Guna Bangunan (HGB) or Right to Build

3.       Hak Pakai or Right to Use

4.       Hak Sewa or Leasehold

An Indonesian citizen is entitled to use any of these structures. A foreigner is not.

In December 2015, the government updated the property ownership laws making it easier for foreigners to own land and property under Hak Pakai and Hak Sewa for residential properties and Hak Guna Bangunan for commercial titles. If someone tells you different or suggests you use a nominee to get a Freehold or Hak Milik title, don’t turn and walk away, run!

In all cases you need to show that you are partly living, working, retiring or investing in Indonesia. 

Hak Pakai certificates are valid for 80 years with automatic extensions after 30 years and 50 years.  Hak Sewa certificates can range from one year up to the same maximum length as Hak Pakai, for a total of 80 years.

If you’re not comfortable with either Hak Pakai or Hak Sewa another option is to create a foreign owned company (called a PMA.) This company can legally have a Right to Build (HGB)certificate. You own the company and the company owns the property. Simple. Straight forward. And most importantly, safe-as-houses-legal!

The bottom line here is that if you play by the rules the property game in Bali is not only fun but has all the potential to be very lucrative.  If you don’t like the rules because you’re in denial of a warped neo-colonial attitude that says you can do what whatever you want because you’re– insert nationality here– then go ahead and find your oracle. He’s waiting for you between Bintang rounds. Let him get you lost in a maze of imaginary short cuts. You can hold on to his cold clammy hands and dive into his rather murky world of double-speak-king-pin wannabes. If that scares you, it should!

It’s important to remember there are professionals out there; people dedicated to making your experience in Bali one to remember (in a good and positive way.) So feel free to give us a call for some down-to-earth-truth-talking-advice. You won’t regret it … the oracle might, but then again, do we really care what he thinks?

If you’d like to learn more about owning property in Indonesia get in touch with us today through hello@sevenstonesindonesia.com

 

 

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Andrzej Barski

Director of Seven Stones Indonesia

Andrzej is Co-owner/ Founder and Director of Seven Stones Indonesia. He was born in the UK to Polish parents and has been living in Indonesia for more than 33-years. He is a skilled writer, trainer and marketer with a deep understanding of Indonesia and its many cultures after spending many years travelling across the archipelago from North Sumatra to Irian Jaya.

His experience covers Marketing, Branding, Advertising, Publishing, Real Estate and Training for 5-Star Hotels and Resorts in Bali and Jakarta, which has given him a passion for the customer experience. He’s a published author and a regular contributor to local and regional publications. His interests include conservation, eco-conscious initiatives, spirituality and motorcycles. Andrzej speaks English and Indonesian.

Terje H. Nilsen

Director of Seven Stones Indonesia

Terje is from Norway and has been living in Indonesia for over 20-years. He first came to Indonesia as a child and after earning his degree in Business Administration from the University of Agder in Norway, he moved to Indonesia in 1993, where he has worked in leading positions in education and the fitness/ wellness industries all over Indonesia including Jakarta, Banjarmasin, Medan and Bali.

He was Co-owner and CEO of the Paradise Property Group for 10-years and led the company to great success. He is now Co-owner/ Founder and Director of Seven Stones Indonesia offering market entry services for foreign investors, legal advice, sourcing of investments and in particular real estate investments. He has a soft spot for eco-friendly and socially sustainable projects and investments, while his personal business strengths are in property law, tourism trends, macroeconomics, Indonesian government and regulations. His personal interests are in sport, adventure, history and spiritual experiences.

Terje’s leadership, drive and knowledge are recognised across many industries and his unrivalled network of high level contacts in government and business spans the globe. He believes you do good and do well but always in that order. Terje speaks English, Indonesian and Norwegian.

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Ridwan Jasin Zachrie

CFO of Seven Stones Indonesia, Jakarta

Ridwan is one of Indonesia’s top executives with a long and illustrious career in the financial world. He holds several professional certifications including being a Certified Business Valuer (CBV) issued by the Australian Academy of Finance and Management; Broker-Dealer Representative (WPPE); and The Directorship Certification for Directors and Commissioners, issued by the Indonesian Institute of Commissioners and Directors.

His experience includes being the Managing Director at one of the top investment banking groups in the region, the Recapital Group, the CFO at State-owned enterprises in fishery industry and the CEO at Tanri Abeng & Son Holding. He’s also been an Independent Commissioner in several Financial Service companies and on the Audit and Risk Committee at Bank BTPN Tbk, Berau Coal Energy Tbk, Aetra Air Jakarta as well as working for Citibank, Bank Mandiri and HSBC. His last position was as CFO at PT Citra Putra Mandiri – OSO Group.

Ridwan has won a number of prestigious awards including the Best CFO Awards 2019 (Institute of Certified Management Accountant Australia-Indonesia); Asia Pacific Young Business Leader awarded by Asia 21 Network New York USA (Tokyo 2008); UK Alumni Business Awards 2008 awarded by the British Council; and The Most Inspiring Human Resources Practitioners’ version of Human Capital Magazine 2010.

He’s a member of the Board of Trustees of the Alumni Association of the Faculty of Law, Trisakti University, Co-Founder of the Paramadina Public Policy Institute and actively writes books, publications and articles in the mass media. He co-authored “Korupsi Mengorupsi Indonesia” in 2009, which helps those with an interest in understanding governance in Indonesia and the critical issue of corruption. Ridwan speaks Indonesian and English.

Per Fredrik Ecker

Managing Director of Seven Stones Indonesia, Jakarta

Per is the Managing Director of the Seven Stones Indonesia (SSI) Jakarta office and has more than 25-years’ experience in Indonesia, China, and Western Europe. He previously worked in senior management positions with Q-Free ASA, Siemens AG, and other companies in the telecom sector. Over the last six years, he has been the Chairman of the Indonesia-Norway Business Council (INBC) and recently become elected to be on the board of EuroCham Indonesia.

His most recent experience is within Intelligent Transport Solutions (ITS), Telecom, and other sectors within the Indonesian market. He is today through his position in SSI and by representing Norway Connect, promoting Nordic and European companies that would like to explore business opportunities in the Indonesian market. He’s also playing an active role to help create the Nordic House concept in Jakarta that will provide an excellent platform for Nordic companies entering Indonesia, where they’ll find a community that can offer support with trusted information and affordable services to enter this market.