Indonesian foreign land title “reforms”: Who’s afraid of the big, bad wolf?

Phil Jarratt
Surfpolitik

6.-land-in-jimbaran-bali-for-sale1.jpgThe Best Western Heritage Hotel on Seminyak’s rather unattractive Sunset Road was filled with frowning bules this week for a “workshop and public forum” designed to quell rising fears amongst Bali’s expat community that the Indonesian government is planning a crackdown on foreign landholdings.

The forum was promoted as offering a “path forward” from the “nominee crisis”, but since no representatives of Indonesia’s new Jokowi government spoke or even attended, the several hundred expats who paid $10 to attend had to do make do with advice from a human rights lawyer and an academic, and hear the alarming story of a bule who is battling in court with a Balinese nominee who has allegedly threatened her with gang violence if she pursues the case.

None of this is new. Had I been there I could have regaled them with the story of how my 25-year leasehold was ripped up on a dodgy technicality a few years into it in the early 1990s. But I’m sure there was no shortage of stories like that. Then and now, if you think you hold land in Bali (or anywhere in Indonesia) through a local nominee, you’d better make sure you stay on the right side of the local, because you can’t win in court.

According to my fly on the wall, various speakers estimated that there was currently $US8.4 billion of foreign investment in Bali through the various forms of legal and quasi-legal leasehold, with 140 active cases of disputed land before the courts. “We were reminded that the nominee certificate is invalid,” my source said, “and that when these arrangements come to their attention, the National Lands Office is required to strike out the name of the nominee and the land goes to the state. Both parties lose. Quite a few of the people at the forum were quite frightened by this prospect.”

Indonesia’s fairly stringent foreign investment laws have been in place since independence in 1945, an obvious reaction to centuries of Dutch colonial control, and framed in law by the Basic Agrarian Law of 1960. It’s a complex set of laws designed to keep Indonesia for the Indonesians, and as such has been subject to corruption since day one, but current or intending foreign “landholders” need to know only this: there are three types of domestic land title in Indonesia – Hak Milik, Hak Pakai and Hak Sewa. Hak Milik is basically freehold, and despite what estate agents and dodgy middlemen might tell you, foreigners cannot own land under this title, a subject we’ll get back to.

Hak Pakai is a secure leasehold of 25 years, usually renewable for another 25 years, but it is a contract between the buyer and the government, requiring the seller to forfeit all rights to the land, something most locals are not keen to do, meaning that the most common form of legal leasehold for bules is Hak Sewa, negotiated directly between the owner and the lessor. This is normally for 25 years too, but frequently such deals are complicated by technicalities such as who in the village really owns the land.

For this reason, the most popular Bali land deal construct for decades now has been through securing power of attorney over the person you believe to be the land-owner. Dodgy to say the least, and in recent years ageing baby boomer hippies and surfers have been thrown onto the streets as their nominees die and the next generation claims the property or demands double the money.

So if you’re intending to make your home in Indonesia, there’s plenty to be cautious about, but there always has been. While so far there has been no indication of a fundamental change to the land laws, what has recently stirred the bules into a lather of righteous indignation was an interview with Ferry Mursyidan Baldan, Indonesia’s Minister for Agrarian Affairs and head of the National Land Agency, who told Kompas.com in mid-March that his office was about to begin an inventory of land “owned” by foreigners. “It is absolutely not allowed for a foreigner to own a single inch of land in Indonesia,” he was quoted as saying.

Ferry drew attention to foreigners using “legally questionable powers of attorney” and “fictive mortgage agreements” to control land, but when asked what sanctions might be imposed on foreign nationals found to illegally hold land, he replied, “There is no need for sanctions, we will just divert possession of the land.”

With alarm bells going off all over Expatria, Ferry quickly added: “We are doing an inventory, not conducting raids. There is no need for anyone to be frightened.”

Well, hell no! Isn’t that what they said to the boys in Kerebokan?

Trying to hose down the hysteria, Balidiscovery.com went to their go-to notary Rainy Hendriany, who is known as one of the more level-headed people in the emotional minefield of property title. Hendriany confirmed what many expats have heard in recent months – that the Jokowi government is seeking to clean up the mess before reviewing and perhaps relaxing legal Hak Sewa title and extending it to as much as 70 years. She also suggested that the government’s preferred foreign title was Hak Pakai, but long term expats believe that this can never work.

Hendriany also ruled out legal foreign freehold: “In my opinion, the political will does not exist to amend higher laws solely for the purpose of allowing foreigners to own property in Indonesia.” She concluded by telling Balidiscovery.com that in the meantime, inventory or no, it would be business as usual, at least in Bali: “Bali is a small Island and the recent abuse of zoning regulations, height restrictions and setback regulations has been in the best interests of nobody in the longer term, especially the Balinese themselves. That villa built today in the middle of nowhere with beautiful views over the sawah (rice fields), results in unaffordable higher land taxes for the adjacent subsistence farmers, which in turn results in the land being sold to new investors and the sawah views are soon gone.

“If this sounds all too familiar to some of your readers, perhaps it is because they live in parts of South Bali where it is already too late.” //PHIL JARRATT

Comments

Keith de Kretser's picture
Keith de Kretser's picture
Keith de Kretser commented Saturday, 28 Mar 2015 at 11:46pm

Great article PHIL! I, like a lot of surfers have been surfing in Indonesia for over 35 years and decided when I was 20 years old I didn't need to own or start a business in Indonesia. And over these years I have seen so many people burnt (not only by their Indo partners but by their ignorance, greed and most of all their self righteousness!) Look at Nusa Lembongan for example and all the Expats on the island who walk around as if they are gods because they think they own big 3 star hotels on a hill or a villa they have to pay yearly fees for which are ludicrous, one invoice I saw for a West Australian surfer who walks around the Island like he is the KIng, totaled 24k a year from the land owner (I helped him type it up on my computer reluctantly) for silly made up costs! These people still pay I assume through embaresment? The Expats get everything they deserve for being such snobs and assholes! I would rather stay anonymous and spend my hard earned Aussie dollars on better things than my ego! Next time you see that Expat hotel owner or Villa owner talk down to your unsuspecting tourist face, hold your head up high and say out aloud "at least I'm not a fool! "

gep's picture
gep's picture
gep commented Tuesday, 31 Mar 2015 at 9:04pm

Hi Keith , Ive had properties on lembongan since 85 and i don't pay all this extra money you have talked about , i pay taxes etc and we try to keep low key on the island otherwise you do turn into those so called expats that thinks they are gods. The thing is some of us started over on the island to help the locals start business and also have a nice lifestyle living and surfing the waves, it has taken off with a lot of money coming in from WA and europeans wanting a similar lifestyle, i agree it has got out of hand and all these land titles etc are really not worth the paper they are written on. MY advise is not to invest in Indonesia as they even transmigrate their own locals from their land if it has mining or agriculture benifits to the Government . I think don't look down at those expats that have brought land in Bali ,lembongan etc at least they have stopped the real rapist of land the Javanese or chinese investor that don't care a shit about the locals and just build complex ontop of each other.
Unfortunately land grabbing happens all around the world and i hope one day soon all local Balinese will be rich enough to start their own villas and business up so they don't need the foreign money and the Government stays away from them

k3ni's picture
k3ni's picture
k3ni commented Saturday, 19 Sep 2015 at 11:23pm

i concur, gep. well said. balanced.

possession is nine-tenths of the law....'s picture
possession is nine-tenths of the law....'s picture
possession is n... commented Friday, 18 Sep 2015 at 1:32pm

I'm here to tell you that over the last 25 years running an advisory services office known as "Bali Safe Harbor" that there are many ways to Rome. There is nothing unlawful about forming a domestic Pt. company which you effectively own and control. This can be quite a useful entity: sponsor your own visas & work permit, hire domestic and other staff, own your vehicle(s), enter leases and it can buy land. All with total security and legitimacy. Nay-sayers and doomsday prophets notwithstanding, there is nothing at all illigitimate about entering a loan agreement with an Indonesian company or citizen and securing the repayment with a mortgage on the property on the recorded owner's certificate, to secure the debt. Your name is registered on the ownership certificate as mortgagee. We've done this for countless overseas clients with never even a nano concern about its legality. All is transparent. All is certified legal by an Indonesian notaris. So its true what a local property agent advertises: "With the right advice, Bali is paradise". Anytime anyone wants to talk shop about the above we'd be only too glad to hear from you: [email protected]

Aunt Clara

k3ni's picture
k3ni's picture
k3ni commented Saturday, 19 Sep 2015 at 11:22pm

It's still not safe yet to do so. And nothing is "transparent" here. Yet. And nothing "certified legal" by an Indonesian Notaris has the strength of law, or practical power to enforce if something should happen that was unforeseen. Not yet, at least. I'm beginning to feel that "balisafeharbor" is not as safe as it purports to be. Hati2, friends. The winds are shifting, but there's no guessing yet, how those winds will settle, and into what pattern.

possession is nine-tenths of the law....'s picture
possession is nine-tenths of the law....'s picture
possession is n... commented Sunday, 20 Sep 2015 at 9:49am

To: k3ni..

Your skeptiscm is understandable. Yet our documentation is reproduced by a notaris, in the notaris s.h./ppat folder with the notaris' signature, document no., etc. When the borrower signs the totally transparent loan & mortgage agreements, the name of the lender (overseas party) is then recorded on the sertifikat hak milik as mortgagee; the original SHM remaining in his possession. BSH is aware of the weather and remains a snug harbor. By design, by intent and by effect. If you or anyone else has specific questions as to how we document built-in recourse/security into all our agreements, instruments, etc., we are forever ready to address such inquiries on a courtesy basis. 08123823697, 0361-772-690; [email protected]

Aunt Clara

norchock's picture
norchock's picture
norchock commented Sunday, 29 Mar 2015 at 8:39am

Good insight Keith. Think I know who you mean wa guy I can think of a couple ppl like that there.i say good luck to the expats big risk involved but imo hard to trust any asians when money involved,and im no means rasist,love indo and its ppl but you know what I mean?did alot of time at lakeys in last 20years but few years ago I was done..its a scene now.expats buying up land and some locals getting abit feisty in and out of the water,getting on the piss and losing it but what do we expect.catch 22 for them

shaun's picture
shaun's picture
shaun commented Sunday, 29 Mar 2015 at 9:35am

norchock wrote: and some locals getting abit feisty in and out of the water,getting on the piss and losing it but what do we expect.catch 22 for them

Well they do that in Oosrtaila too. ;-))

I'm the scab you keep picking off and is there again the next day.

norchock's picture
norchock's picture
norchock commented Sunday, 29 Mar 2015 at 10:02am

Yeah your right shaun...never had a fight in the surf but I could write a book on losing it on the piss!!

indo-dreaming's picture
indo-dreaming's picture
indo-dreaming commented Monday, 30 Mar 2015 at 6:52pm

Good article, most I've read on this topic don't go into any detail at all on what the government are supposably cracking down on.

I personally own/lease property in Indonesia mostly for retirement reasons and i think like many things it can be done in a good way or a bad way, i haven't built a big bad arse villa or anything just have a modest little termite ridden village house in paradise, we get on fine with the locals and help where we can, we will one day knock it down and rebuild but always plan to do tastefully, i also have friends that have retired already in the same remote area and get on fine with the locals and bring many positives to locals lives, IMO its all about first having an understanding of Indonesian culture and most importantly having respect, rather than coming in and being that rich arrogant know it all bule.

Ive been very careful in how I've set up things and have got my Indonesian Inlaws to buy outright at local price with our money (Hak Milik) and then leased long term (Hak Sewa) from them just incase of any family dispute or break up.

My wife is Indonesian and many foreigners married to Indonesians do buy outright in their Indonesian partners name, but technically even this is not legal and a good notary won't do the deal, because in Indonesia like most places all married couples own everything 50/50 which technically means the foreigner owns 50% which is not possible, apparently if you set up a pre nup before you get married saying the property is owned completely by the Indonesian partner then its okay, but i never did it and you then have the risk of losing everything if you do happen to separate.

Ada gula, ada semut!

troppo dichotomy's picture
troppo dichotomy's picture
troppo dichotomy commented Sunday, 29 Mar 2015 at 3:30pm

great article.
indo dream i've been told similar to u.
a law that the notaris can take the property from the indonesian women married to bule if he(notaris) so choo$e$ as its an invalid title!

100% agree with kieth van krester n norcock!i love 2sit back n watch big eyed bule investors get the lokals in on a project.my guy/gal is cooL?.....
not always but alot of the time it ends up ugly!
its the same game in mexico gringo...

my advice is; keep as far a way as possible from inlaws!!
;any proposal where i pay 100% and only become a 49%owner? is BAD!

indo-dreaming's picture
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indo-dreaming commented Sunday, 29 Mar 2015 at 4:29pm

Ive never heard of this but in many places a good notaries especially in somewhere like Bali will ask to see the Indonesian parters KTP (identity card) to see if there married and to who, Indonesian or foreigner. Under Indonesian law technically if say a Indonesian partner married to westerner inherit land the Indonesian partner has a year to sell or transfer into another Indonesians name, I post over at the Living in Indonesian expat forum, and there is some real clued on westerners on Indonesian law, the topics been done to death over there, but word is no body has surprisingly lost there land in this way, but its Indo and things can change tomorrow, i always say "in Indo anything can and does happen"

Regarding inlaws technically my Inlaws own our properties but even if things went bad we still have the legal right to use the property for 50 years, in any case i can't own the properties outright anyway so i would rather they own them, than some stranger, my inlaws are real good but yes things can always change but i have lot more leverage over my inlaws than i would a stranger if things did go bad..but each to their own.

Ada gula, ada semut!

k3ni's picture
k3ni's picture
k3ni commented Sunday, 20 Sep 2015 at 12:27am

troppo's mostly right. under present law, neither the indonesian spouse, nor the non-indonesian has any ownership rights over the land whatsoever. you might think you have "watertight" paper protecting you individually or as a couple, but it's definitely leaky because the law doesn't concur. anybody, anytime, for any reason at all, could put you on the rack and stretch you until you cry "uncle". the only thing protecting you from such a nightmare is "swarm dynamics" . . . as long as you're in a swarm, like a school of small fish, it feels less likely that you're the one that's going to be eaten. i'm not cynical, i'm practical. in a "spouse-name-borrowing" situation to hold property, you'd both better be diligent with your prayers, so you don't become the eaten fish in the swarming school of minnows. there's nothing else to prevent it, at this point. prayer. offerings. invisibility (which = diminished rights and freedoms).

chin's picture
chin's picture
chin commented Sunday, 29 Mar 2015 at 4:02pm

I'm still a bit confused here. Is there any option at all under Indo law, where a buhle can legally lease a place, say an apartment? either short or long term i.e. 25 years or 1 year?
All my previous research said yes the fairly common 25 year lease of an "apartment" type building was legit. Maybe not?

indo-dreaming's picture
indo-dreaming's picture
indo-dreaming commented Sunday, 29 Mar 2015 at 4:52pm

Yes there is, its totally legal to lease property short or longterm (either Hak pakai or Hak sewa), and thats what the government prefers you to do if you want to enter the Indo property market.

Its more about the government stopping foreigners from trying to use loop holes or legal technical contracts that try to give a foreigner legal rights to own a property that has been purchased not leased and they are basically saying you can do these things but their not legal and won't give you any more right to owning property than without, because basically only Indonesians can own property.

For example some people do things like, i fund the property it cost $100,000 grand and i put it in my mates Mades name, but then i have documents drawn up saying that Made owes me $100,000 grand, and if he runs of and stops me using the property or sells the property he must pay me back $100,000 grand.

Technically the way i see it the Nominee system is still legal, its just your basically buying a property for someone else and taking the risk that they will always honour that you can use it and they will not sell it, which off course holds a lot of risk, so for most people its better and much safer to just to lease long term. (Hak pakai or Hak sewa)

Ada gula, ada semut!

wurtulla's picture
wurtulla's picture
wurtulla commented Sunday, 29 Mar 2015 at 4:54pm

"

keepSurfin

chin's picture
chin's picture
chin commented Sunday, 29 Mar 2015 at 6:35pm

Ok Indo thanks, I pretty much already understood most of that, it was this paragraph in Phil Jarratt's story that threw me.

---------------------------------------------------------
Hak Pakai is a secure leasehold of 25 years, usually renewable for another 25 years, but it is a contract between the buyer and the government, requiring the seller to forfeit all rights to the land, something most locals are not keen to do, meaning that the most common form of legal leasehold for bules is Hak Sewa, negotiated directly between the owner and the lessor. This is normally for 25 years too, but frequently such deals are complicated by technicalities such as who in the village really owns the land.
----------------------------------------------------------
It' just sounds like everything is fraught with potential trouble.
I have heard of cases where someone leases a property, only to have another family member come along and dispute boundaries etc. or even dispute ownership of part of the land.
I'm not interested in buying anything. just a long term lease.
Also I wonder why these long term leases can only apply to "apartments" and not to a free standing house.? Apartment can be a pretty broad term too, not sure of the ins and outs of that.

k3ni's picture
k3ni's picture
k3ni commented Sunday, 20 Sep 2015 at 12:32am

you're absolutely right, chin. hak pakai is strong, but it is NOT a leasehold. it has the benefits of (conditional) ownership, in that as a hak pakai "owner" you are able to yield the appreciation on your investment, just like a full owner, because you can sell hak pakai to an indonesian, and they will be able to revert it to full hak pakai following the transaction (no value lost, no matter how long or how short your tenure on the property has been). leases are also legally valid (with a whole raft of somewhat blurry conditions and requirements), but there is as yet no reliable way to enforce a leasehold, or to determine confidently the validity of the title for the land over which your leasehold has been made. nasty surprises still happen. regularly. and should a dispute arise, whether your are indonesian, or non-indonesian, you'll almost certainly lose your shirt . . . just to keep your shorts on . . . or (more likely) . . . you'll lose both shorts and shirt and your faith in humanity. as i have said before, the winds are shifting. but we don't know yet what they will blow in, or how they will set. so it's impossible to chart a course confidently at this point, regrettably. gamblers welcome. but when you enter a casino, you need to be prepared, psychologically and financially, to walk out broke.

marcS16's picture
marcS16's picture
marcS16 commented Wednesday, 8 Jun 2016 at 12:35pm

k3ni, thanks for your very knowledgable comments about Hak Pakai and its benefits. There is one big disadvantage though. You might yield the appreciation in underlying property value BUT at the same time the value of your investment declines pretty much immediately due to the term on your Hak Pakai lease declining. So therefore, Hak Pakai does feel more like a Lease than a "conditional ownership" because after 25 years (or even after extension) the building and land falls back to the original owner (!). This has a major impact on the total value. In the UK for example, Leaseholds are usually for 999 years and there is a quasi-automatic renewal process so Leasehold is as strong as Freehold.
How do foreigners buying here on Hak Pakai deal with the depreciating value?

yehmateyeh's picture
yehmateyeh's picture
yehmateyeh commented Sunday, 29 Mar 2015 at 8:49pm

Suck eggs. The place is a stinking wreck thanks to the greed of just about everybody. About time the Indo Government shot itself in the foot and humbled a few greedy fools

Yehmateyeh

k3ni's picture
k3ni's picture
k3ni commented Sunday, 20 Sep 2015 at 12:53am

it's difficult to disagree with that.

norchock's picture
norchock's picture
norchock commented Sunday, 29 Mar 2015 at 9:18pm

Yeah mate yeah is speaking from experience...the poor cunt got fucked over big time,lost his 5 story ladyboy club...he had big plans with ladyboy gardens suck eggs cockhead

davetherave's picture
davetherave's picture
davetherave commented Monday, 30 Mar 2015 at 10:05am

my ex flatmate working over on Barrow Island who now spends ti me off in bali purchased a block of land and i assume in his mates name. I dont understand any of this, but could they then turn around and say that my mate doesnt own it, the bali family does, even if he has a document saying that its his or he is in partnership with bali guy. Can anyone help me with this, i would hate to see him ripped off.

davetherave

k3ni's picture
k3ni's picture
k3ni commented Sunday, 20 Sep 2015 at 12:36am

yes. they can do that. but (by the letter of the law), the Balinese "name-givers" are not entitled to anything either. so either the Balinese (or their enemies, creditors, or far-flung family) will inevitably be perpetually tempted, even likely, to pull a fast one. the value of the property (if sold by them) would yield more than enough money to pay the bribes to courts and police to award the land to them and deport your friend or put him in jail, and still yield an attractive profit to the protagonist(s) in the land-grab. that's really the way it is, unfortunately.

udo's picture
udo's picture
udo commented Monday, 30 Mar 2015 at 11:00am

The document is worth nothing.......Indo may put some links up to the many stories of Indo partners doing the dirty
What did your mate outlay in $.

blasphemy-rottmouth's picture
blasphemy-rottmouth's picture
blasphemy-rottmouth commented Monday, 30 Mar 2015 at 11:08am

Bankers have always and will always be the hardest core "surfers" on earth. Maldives, Indo, Goldy, Malibu, North Shore, Etc...

And they never lose.

blasphemy-rottmouth's picture
blasphemy-rottmouth's picture
blasphemy-rottmouth commented Monday, 30 Mar 2015 at 11:50am

May I also add they pieces of shit. Pardon my truth.

davetherave's picture
davetherave's picture
davetherave commented Monday, 30 Mar 2015 at 1:15pm

udo,
dont know the coin outlay, just have to hope for the best. it's a small block out near ulu, i think he and bali mate are hoping big resort will want their land and buy it.
anyway, his choice, he likes a punt, i hope this one turns out to be a winner

davetherave

k3ni's picture
k3ni's picture
k3ni commented Sunday, 20 Sep 2015 at 12:55am

if a big resort is interested, they will simply calculate the value of the land, make a "bribe and terror" budget that gets them the land for far less, and carry out the "bribe and terror" program. he hasn't got a chance, imho.

stunet's picture
stunet's picture
stunet commented Monday, 30 Mar 2015 at 2:09pm

Recent blog post from the owner/builder of Merdeka House at Maluk near Supersuck. No idea what ownership details are but he outlines a few other problems for expat landowners.

http://merdekahouse.tumblr.com/post/114749974476/the-only-thing-they-won-t-try-and-steal-is

memlasurf's picture
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memlasurf commented Monday, 30 Mar 2015 at 2:42pm

This seems to sum up what I would think you would need to deal with if building over there. Looks easy when you are there on holidays, whole new world once you try to own and build something. I am always whinging about red tape for construction here in Victoria however at least it is regulated and fixed target - if a tad slow and unwieldy. Asia generally is complex, interwoven and corrupt, not a great mix for building and owning/long term leasing. I will stick to renting, which is cheap as chips anyway compared to Australia.

k3ni's picture
k3ni's picture
k3ni commented Monday, 30 Mar 2015 at 4:28pm

Hi Phil!
You've done a great service in writing this up. Bravo! I'd like to clarify one point, though. You wrote about Hak Pakai, that "it is a contract between the buyer and the government, requiring the seller to forfeit all rights to the land". This is a common misconception that isn't completely accurate. Hak Pakai isn't a contract with government, and rights over the land are not forfeited. It is more accurately described as Conditional Ownership. When a foreigner purchases a property, if he fulfills the requirements for a Sertifikat Hak Pakai, then a Hak Pakai (HP) deed is issued to him, in his own name. It is the only deed on the land, and his rights over the land are full rights of ownership (but with conditions). The conditions are imposed by the government. They are: Residency in Indonesia (KITAS/KITAP); the property is a residence; he may hold only one property in Indonesia with HP; the property is no more than 50 "are" in size; payment of a small percentage of the tax value of the property to the government. Finally, his Sertifikat must be renewed after 25 years, at which time he simply must show once more that he meets the conditions listed above, and again pay the fee based on property value.

Meanwhile, he has full ownership-equivalent rights over the property: can sell it (resulting in a Sertifikat Hak Milik if the buyer is Indonesian, or a new Sertifikat Hak Pakai if the buyer is not); can borrow money using it as security (mortgage it); can rent it out, or rent out rooms in it (only by establishing an appropriate business entity and securing necessary permits). Nobody can undermine those rights, not even the government. If a public project were planned for the location, and the government (new laws on this) exercised its public property acquisition powers, the Hak Pakai "owner" would have the same rights as a Hak Milik owner (to be compensated according to the law, due process, etc.).

Regarding the residency (KITAS/KITAP) requirement, this does not stipulate that the foreigner must stay in Indonesia all the time to maintain legal residency status. As one does, he can spend time in his home country, or travel, and can even rent the property out commercially while away (with business licenses/permits to do so).

The Hak Pakai title is meaningful particularly to people who wish to have a second home, retire, or bring high-level employees to work in Indonesia as expats (like banks and various other industries do). The investment in the property is not diminished during the time the foreigner resides there. It appreciates just as much as Hak Milik properties around it. For example, if a retired professional couple from Australia would like to retire in Indonesia, they might sell their home in Australia, and invest the proceeds in a home here. They may anticipate that when they become unable to live fully independently, they intend to sell the home, and use the proceeds to buy into a retirement community or return to Australia and live in an apartment with assistance from family or others. With HP they will be able to do so, as their investment in the Indonesian property is secure, and appreciates along with the market. They will be able to sell the Indonesian home, and recover their investment (plus its appreciated value), in order to fund their next home.

The example above is somewhat similar to the situation of a foreigner who has the opportunity to work here, and intends to do so for a certain number of years, and then return to their home country. If their property in Indonesia appreciates at a greater rate than property in their home country, when they sell it and return, they will be able to buy an even better house than they had before. :)

Hak Pakai is much closer to Conditional Ownership, than it is to Leasehold. Much.

There are, of course, tax issues. Indonesia, oddly enough, demands foreign residents (KITAS/KITAP or others present more than 6 months a year in Indonesia) pay taxes to Indonesia on their foreign income (on which they have already paid taxes in their home country). This is a real problem for many would-be investors here. One hopes that Indonesia will enact more favourable reciprocal tax treaties with other countries. It certainly will do so with ASEAN nations, or already has.

To avoid the double tax burden, an Australian, say, could consider taking citizenship in one of the ASEAN nations, and then purchase Hak Pakai property in Indonesia, with favoured-nation reciprocal tax treaties.

A foreigner may also become an Indonesian citizen, and then the issues above are all resolved.

Main Point: Hak Pakai is not a fuzzy "deal" with the government. It is Conditional Ownership.

k3ni's picture
k3ni's picture
k3ni commented Monday, 30 Mar 2015 at 4:14pm

Also, please note that there aren't any land law reforms taking place (or planned), related to foreigners' rights over property in Indonesia. The "breaking story" was simply that the new Minister of Land and Land Use has stated that he intends to effect immediately, better compliance with existing laws and regulations. Nothing has changed. Nor is it likely to. They're just getting their ducks in a row, and trying to close the gaps made by "tolerated abuses of law" which allow all kinds of nefarious operators to wreak havoc, and damage the investment climate here, as well as the sovereignty of the nation.

Readers should take note that an Indonesian nominee does not have ownership rights, in fact, any more than the foreigner does. The nominee (even in the eyes of the law), is not the legitimate owner of the property, and their name on the deed is illegal, null and void.

A property with no valid deed in Indonesia defaults back to state land.

State land is the same as land that has never been deeded. And just like never-deeded land, any party that can claim legitimate rights over that land, may apply for those rights to be documented/deeded according to the relevant laws and regulations, at their local Land Registry (BPN). In the case of a foreigner, they would simply complete the packet of forms for requesting Hak Pakai over the land, and include relevant supporting documents, then submit the packet (which is provided by BPN), to BPN for processing. If the conditions of Hak Pakai are met, and the foreigner has shown that they paid for the land (with the wrong structure perhaps), have occupied it, built on it with a correct IMB, paid taxes on it, and meet all the requirements of Hak Pakai, a Sertifikat Hak Pakai would be issued in their name.

I understand that Hak Pakai can also be granted OVER an Indonesian's Hak Milik deed, but I know nothing specific about that, and it seems peculiar given the letter of the relevant statutes and regulations. Double-deeded land? That's hard to work out.

k3ni's picture
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k3ni commented Monday, 30 Mar 2015 at 4:19pm

There are actually FOUR ways a foreigner can hold property here. You missed one. They can hold it by HGB. That is a form of property tenure that can be granted to a legal entity, such as an Indonesian company (PT) or a Foreign Investment Company (PMA). If a foreigner has established a PMA, then the PMA can hold the property with HGB.

If a foreigner wishes to hold property in Indonesia for commercial purposes (rental villas, rental complex, other business purposes), then they are best advised to establish a PMA and hold the property by HGB via the PMA. This is entirely legal, and very secure.

indo-dreaming's picture
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indo-dreaming commented Monday, 30 Mar 2015 at 7:00pm

Except didn't they change it and to start a PMA there is a minimum investment amount..which from memory was some crazy amount.

Ada gula, ada semut!

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k3ni commented Sunday, 20 Sep 2015 at 12:38am

yup. it's kinda crazy. and fraught with red tape, to set up a PMA. and the red tape trails off into the far future forever. at least as long as things remain as they are now. *sigh*

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k3ni commented Monday, 30 Mar 2015 at 4:20pm

EXCELLENT article, btw!

And I love the term, "Expatria". :) The Disunited People's Republic of Expatria. Has a ring to it! ;)

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k3ni commented Monday, 30 Mar 2015 at 4:46pm

Regarding Powers of Attorney:
Interestingly, in Indonesia NOBODY is allowed to grant or receive full Powers of Attorney over LAND. Not even Indonesians. All full Powers of Attorney related to land, are null and void. Useless. Invalid. Even if the person granted these Powers of Attorney (Kuasa) is an Indonesian citizen. You can grant full Powers of Attorney over other assets, but not land. This is expressly forbidden. It's surprising that so many notaries make these "Akte Kuasa" anyway. They're invalid. And any agency that treats them as valid, is either confused (most likely), incompetent (very possibly), or complicit/criminal (one would hope not, and hope does spring eternal, as they say).

udo's picture
udo's picture
udo commented Monday, 30 Mar 2015 at 4:52pm

Thanks for the info K3
trying to absorb that - you just done my fucking head in

troppo dichotomy's picture
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troppo dichotomy commented Monday, 30 Mar 2015 at 5:00pm

yeah k3!great article on a great article

multi national corp is the best way to go.

chin's picture
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chin commented Monday, 30 Mar 2015 at 5:39pm

That's some good info K3mi, you seem to be in the know maybe you can answer this.
Why do leases only apply to apartment type residences and not free standing houses, or have I been missinformed?

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k3ni commented Sunday, 20 Sep 2015 at 12:41am

legal leasehold (for KITAS/KITAP holders) is valid on landed properties, not just on "apartments". there are some conditions and "issues" that can be problematic, but leasehold (within the limitations of the law) for foreigners on landed property (house on land) are technically valid. that said, if anything unexpected happens, you haven't got a leg to stand on, no matter how technically/legally valid your investment might be. not as long as there is a complete lack of Rule of Law and law enforcement in Indonesia. which is the situation now, especially in Bali.

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kpb commented Monday, 30 Mar 2015 at 7:40pm

No-one should invest in Indonesia, unless they understand the endless corruption, government harassment, bureaucracy (you may need up to 20 different permits for a hotel to be renewed regularly), total lack of a sensible legal system, no statute of limitation over land (the son or friend of the original owner can take you to court 25+ years after buying land), deeply-rooted Indo emotions, the commonplace issuing of multiple Certificates/Titles by the government Lands Office (BPN) on the same piece of land which leads to endless court cases, the numerous court cases when the locals appeal from the lower court to the highest Jakarta court, the lack of police help and the numerous businesses of expats that have been blocked by criminal gangs. There's more reasons, but I won't go on. Basically, don't invest in Indo. Just come for a nice holiday.

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k3ni commented Tuesday, 14 Jul 2015 at 2:21am

Bingo!

udo's picture
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udo commented Monday, 30 Mar 2015 at 8:26pm

kpb, whats your thoughts on Stu's link to Merdeka house ?

My view is the owner should bail now ......while he can !

g_banger's picture
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g_banger commented Tuesday, 21 Jul 2015 at 2:47pm

I stayed at Merdeka House last month and spoke to the owner Joey at length about the land purchase and building process. Sounds like it was a massively stressful experience at times but everything is looking good now and he is reaping the rewards - has a pretty epic lifestyle up there.

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norchock commented Monday, 30 Mar 2015 at 9:10pm

West sumbawa,hui hui,bangko bangko,parts of west java,I think no matter how freindly you can be theres always ppl that give you an uneasy vibe.of course all muslim communitys,plenty of expats married into this many living the dream,but pretty harsh to wish ppl lose out on there invesment no matter how big

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Blowin commented Monday, 30 Mar 2015 at 9:48pm

When I was younger and a bit less idealistic I looked into buying the 2 acres in front of Supersuck next to the Supersuck Hotel.

It was all lined up only it turns out that when the owner said he had the land certificate he was , uh, not entirely accurate.

Sure , no problem , he said he could get hold of it though ....after I'd paid him.

I'd say don't do it....as tempting as it seems.

Or maybe listen to Leigh From Scar Reef Villas as he regales you with his story of being attacked by sword wielding intruders one night....it's alright, they only broke his arm before his staff saved him.

Or the builder that took his money and refused to build anything till he got the local mafia to sort him out for a price.

Good times.

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k3ni commented Sunday, 20 Sep 2015 at 1:01am

bingo! that's the norm. not the exception.

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norchock commented Tuesday, 31 Mar 2015 at 10:21pm

Gep sounds like you know alot on this.i personally dont look down on expats like yourself but some do justify it,at the end of the day were all blowins no mater how much money

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sypkan commented Wednesday, 1 Apr 2015 at 1:22pm

Stu's merdeka house story is pretty much the norm.

I love that line " the only thing they don't steal is knowledge"

Even if you get through the land ownership minefield, so many people end up on their second and third team of builders before they get their dream finished, in more ways than one.

"It' just sounds like everything is fraught with potential trouble."
Yep, that's right chin, but If you are still interested I think I know half an answer to your persistent questioning. My brain is cooked form reading all that so cannot pin it down exactly but I reckon you are talking about some weird apartment clause. I thought it was about buying but maybe it is just leasing, where it is possible for bules to lease/buy apartments in buildings that are over a certain height. Then bules can invest because they actually have no rights or control over the land (building footprint). Indos apparent coconut tree law means anywhere good (anywhere with surf) doesn't have apartments high enough. which means enjoy your retirement in Jakarta

chin's picture
chin's picture
chin commented Wednesday, 1 Apr 2015 at 11:00pm

O.K. Sypkan thanks, it's all clear as mud.
Not interested at all in investing or buying, just renting/leasing long term.
I got the little bit of (confused) info I have from the Bali Expats site, I probably should get back on there and get it straightened out.
Not even sure I want to stay long term anymore anyway, was thinking about the retiring side of it, cost of living and basing ourselves there, but to be honest these days after a few weeks there i've kind of had enough and glad to be back here again, much as I love Indo.

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velocityjohnno commented Wednesday, 1 Apr 2015 at 8:56pm

Just like to tip the hat to 2000 years of Roman, Anglo-Saxon, Norman law and its progression including Common law, the Magna Carta, Reformation, liberal reforms and free title to property. Good on the Westminster system, glad we've got it in Oz.

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k3ni commented Sunday, 20 Sep 2015 at 12:42am

bingo!

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k3ni commented Tuesday, 14 Jul 2015 at 2:18am

Have a look at this:
"A Nightmare in Paradise" -- It's all over the Fairfax Media newspapers. Sunday colour feature. Ye gods.
http://www.smh.com.au/world/a-nightmare-in-paradise-20150711-gi8lrr.html

zenagain's picture
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zenagain commented Friday, 18 Sep 2015 at 3:25pm

My goodness. That poor lady.

Caveat emptor folks.

Ignorance is Zen

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k3ni commented Saturday, 19 Sep 2015 at 11:59pm

. . . appreciate the empathy, compassion . . . it's even worse than you might imagine . . . all concerned parties are more than welcome to chip in, visit, make contact, link up, learn, and be a part of the solution rather than a part of the problem.

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udo commented Friday, 18 Sep 2015 at 3:38pm

Susi has her own web site, some good reading.

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udo commented Friday, 18 Sep 2015 at 5:48pm

Hati, Hati, Bali : By Jed Smith.

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k3ni commented Sunday, 20 Sep 2015 at 12:46am

quick comment. the notary you mention in the original post, who i do respect, was one of the most fervent advocates of nominee arrangements, way back when my late husband and I were struggling through the process of conversion to fully legal Hak Pakai title over the land that our home (now my home, my only home) is built on. she acknowledged that a nominee arrangement, no matter how you structure it, has no validity in law (and therefore you have no "ownership" whatsoever), but still advised it, as an equal or preferable option to compliance with the letter of the law. again, various quasi-legal, paper-thin "safety nets" were recommended to ostensibly limit the risks of losing everything. needless to say, we didn't opt for a nominee arrangement. and needless to say, i've still had to face, and continue to face, untold terror, loss, damage, crime and corruption during the past 3+ years, and despite my unequivocal, and formally confirmed rights, I have not secured my home, despite there being no nominee, and despite all documentation being sound, solid, original, and recognized in law here. that's the way the cookie crumbles in Indonesia at the present moment, sadly. and crumble it does. until some things change, which we hope they will, for the benefit of all . . . not least, for the benefit of the Indonesian people themselves, who (even more than foreigners) fall victim to land-grab tactics by nefarious individuals and groups.

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k3ni commented Sunday, 20 Sep 2015 at 12:23am

absolutely everything that appears above is completely academic, theoretical, and meaningless, as long as indonesia continues to have no Rule of Law, no functioning court/justice institutions, no governing government at any level, and no effective law enforcement/police force. we can all argue until we're blue in the face about legalities, but until there is some semblance of Rule of Law, institutions of justice, and law enforcement in Indonesia, it doesn't matter and we're wasting our breath (and ten-finger keyboarding skills). my take on it all is that we as individuals, groups, agencies, nations, and peoples must feel called-upon to encourage and support the establishment of INDIGENOUS Rule of Law in Indonesia, functioning courts of justice, functioning agencies of law enforcement (police), and mitigation of the iron grip that corruption and organized crime have on what purport to be government agencies, and institutions of justice. it matters, not just for what any one of us wishes to do, achieve, enjoy, or contribute in indonesia. it matters for all of the quarter-billion people of indonesia. and even more so, for the 7 billion inhabitants of our earth. for the seas. the skies. the creatures. the climate. the planet. indonesia is such an essential, enormous and complex biosystem that it supports us all, the world over. if it gets compromised, life on earth gets compromised. and that means me. and you. and the kids. and tomorrow's kids. and the flora and fauna, fish and wildlife. so kick in your contrib for a better indonesia, and kick out the jams about it, if you actually do care about anything other than yourself and your immediate personal comfort, and do so in whatever form it might take. be serious about it. it matters more than you may have thought, before now.

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indo-dreaming commented Sunday, 20 Sep 2015 at 7:56am

I took a different approach of late, i gave a good Indonesian friend in a remote area some money towards land in front of a pretty fun wave, figured id rather him have the land and build something for surfers and help him produce a good income rather than the inevitable of someone i don't know be it local or westerner do it, i know he won't sell for profit as knows the money it will produce is much more than a one off lump sum, and for me in the future i will have a place to stay for free right on a fun wave when i want without all the hassles id have to worry about if the place was mine such as maintenance securing the place when I'm away etc.

Yeah sure i wil never produce any income from it or make money from selling it, but i still have all the other benefits and if for some reason one day the friendship goes sour what I've lost will still be less than what the guys in nearby resorts pay in a week stay.

IMO thats the moral of the story about Indo, Only put in as much money towards property as your willing to possibly lose.

Ada gula, ada semut!

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udo commented Saturday, 2 Jul 2016 at 6:22am

Mrs Sippy story - SMH.