Relaxed Foreign Ownership Laws on Real Estate

Indonesia has made it easier for foreigners to own property in the country with Government Regulation 18 of 2021 (GR 18/2021), which will launch the biggest changes to Indonesia’s property laws in the past 20 years.

GR 18/2021 makes amendments to major land rights/trusts covering:

• right to administer)Management rights, HPL);
• right to agricultureBusiness use rightsAnd HGU);
• right to use (Right of use, HP);
• right to buildBuilding use rightsAnd HGB)
• title to stacked units (Flat Unit OwnershipAnd HMSRS);
• rights to ground and subterranean spaces; And
• Land registration.

A notable provision under GR 18/2021 states that foreigners and foreign legal entities can now own apartments and houses. However, foreigners will only be able to own apartments located in special economic zones, free trade zones, industrial zones, and other economic zones. Moreover, the value of the property must be more than the minimum – which varies depending on the province in which the property is located.

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The right to use, the right to build, the right to farm

There are two types of right to use (HP) addresses:

• the right to use during a certain period; And
• Usufruct of land used for specific purposes.

This land title deed usually refers to the right to use/harvest land directly owned by the state or private land. This land can also be used as a construction site as well as for agricultural purposes.

The right to use the address for a certain period can be granted to foreign legal entities that have a representative office, foreign citizens, as well as domestic entities and citizens. This includes state land, freehold land, and the right to administer the land.

If granted for state land and the right to administer the land, the right of ownership is for a maximum of 30 years and can be extended for another 20 years. Once the time period is up, the title deed can be extended for another 30 years (80 years total). Previously, the HP title could only be granted for 25 years, extended for another 20 years, before another renewal for 25 years (70 years total).

The Right to Build (HGB) is a property right granted to Indonesian citizens and foreign companies (PT PMA) for the purpose of constructing or using a building on the land. The maximum term for an HGB title is 30 years and can be extended for another 20 years. Once it expires, it can be renewed again for another 30 years (80 years in total).

The Right to Agriculture (HGU) is usually granted to state land for farm development and can be granted to foreign companies. The maximum term of the title deed for this land is 35 years and it can be extended for another 25 years. Upon expiration, it can then be extended for another 35 years.

GR 18/2021 requires that holders of HGU, HGB and HP bonds begin activities on the land, whether in building construction, farming or any other use of the land, within two years of the title being granted.

The right of foreigners to own apartments and real estate

Under GR 18/2021, foreigners can now own condominiums under title to land titles for stacked units (Flat Unit Ownership, HMSRS).

Foreigners can only obtain HMSRS for apartments located in special economic zones, free trade zones, industrial zones or other economic zones (tourist zones, suburban areas or urban areas). Furthermore, foreigners can also own homes built on land with HP addresses and apartment units built on land with HP or HGB addresses.

Real estate owned by foreigners is subject to certain restrictions such as:

• minimum price;
• land area and number of housing units;
• Residential zoning and
• Land area.

The minimum price for land and housing units varies between governorates.

The new electronic land registration service

Through this regulation, the government has introduced an electronic land registry service to encourage the digitization of land certificates throughout Indonesia.

As such, electronic or printed information about it is admissible in court as long as it has been verified as authentic by an authorized official. Given the frequent forgery of land titles in Indonesia, this is seen as a welcome development to stamp out such abuses.

Land and subterranean rights

This is a new development introduced under GR 18/2021, which provides land rights (in the form of HPL, HP, or HGB titles) for ground and underground spaces, such as the development of underground transit facilities, underground shopping malls, or mass transit services, among others. other things.

The use of the above-ground space is limited to the height limit stipulated in the building modulus ratio, while the use of the subterranean land is limited to the depth described in the spatial plan or up to 30 meters below the surface.