There are a number of ways to invest in Indonesian property, one of the best ways to invest in property in Indonesia is through the PMA company.
Foreigners can invest directly in Indonesian property if it is owned by PT PMA ”Penanaman Modal Asing”, or foreign investment company which is under their control. The difficulty with this approach is that the property can only be used for the purpose specified in the original application to form the PMA company. so you may need to find out best fit PMA company accordance with your Investment purpose, PMA companies cannot hold Hak Milik "Right of Ownership'' or Freehold. When freehold land or property is sold to a corporate entity the title is changed into a HGB “Hak Guna Bangunan”, or Right to Build.
In Indonesia, Hak Milik, which means Right of Ownership or Freehold Titled, is the highest number of land titled in Indonesia. Only Indonesian citizens can use this benefit. This means that foreigners can never own property in Indonesia forever. But if you own a PT PMA company, you can buy a property and get a title called HGB Hak Guna Bangunan “Right to Build”, which is the highest title a foreigner can get.
If you use Hak Guna Bangunan, the Indonesian Land Office will write the name of your PT PMA company on the land certificate, not your name. Only Indonesian or foreign businesses with a PT or PT PMA can get this privilege. It is good for 30 years at first, can be extended for another 20 years, and can be renewed for another 30 years, for a total of 80 years.
Having an HGB title is great because it makes you feel like you own the land. You can change the HGB title to a Hak Milik title for a small fee (or vice versa). This means that your company has a Freehold certificate. The land value of an HGB title doesn't go down over time like it does with a Hak Sewa (leasehold) title. You might be able to sell your HGB (or converted Hak Milik) title for the same price or even more in 20 years. This means you could buy a home with an HGB title right now, rent it out for the next 5 years and make money from the rent, and then sell the property for more than you paid for it after 5 years (given that land prices are rising over time).
If there is a problem with the property you bought through PT PMA, the law will protect you and your purchase. This is important because if you buy land or a villa through a local nominee setup, this is the risk you are taking. Using the nominee structure, in which a local is registered as the official owner of the Hak Milik title, many foreigners try to buy a Freehold property. This is a common way to do business, but it is against the law and won't protect the foreign buyer if something goes wrong. We suggest that you think about an HGB purchase instead of a nominee structure so you don't have to take such risks. After all, you don't want to risk your investment in a home and get into trouble because of it.
HGB can be used for single-family homes, but their main purpose is to help foreign and domestic property developers who want to build a lot of homes. The HGB is for businesses, while the Hak Milik title is for people who own property on their own. So, a PT or PT PMA firm name is used instead of a person's name as the title holder. So, the property becomes part of the company's assets and has a stronger connection to how much tax the company pays.
Foreigners can also legally get a Hak Sewa (Right to Lease) title if they want to buy a villa. This means that as a foreigner, you can legally own the property in your own name, without having to start a business. Depending on its license, a land or villa bought through a PT PMA firm can be used as a spa, restaurant, or villa development to rent out or sell for a profit.
Published By Derry Khudlori
Banner Photo By Ramdhani Arifin