FAQ: Investing in the Indonesian Property Market

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1. Can foreigners buy property in Indonesia?

Yes, but with restrictions. Foreigner individual investors can buy property under the Hak Pakai (Right to Use) title for residential purposes, typically for 30 years (extendable). 

For commercial and investment purposes, foreigners usually invest through an Indonesian company (PT PMA) to acquire Hak Guna Bangunan (HGB - Right to Build), which Indonesian nationals also hold when they own commercial properties.

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2. What are the common types of land ownership in Indonesia?
   •    Hak Milik (Freehold): Only available to Indonesian citizens.
   •    Hak Guna Bangunan (HGB – Right to Build): Available to companies, including foreign-owned ones (PT PMA).
Indonesian nationals owning commercial properties such as offices, retail premises, shophouses typically hold this title.
   •    Hak Pakai (Right to Use): The most common option for foreigners buying residential property under personal names.
   •    Hak Sewa (Leasehold): Available to foreigners and companies for a set period.

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3. What are the best locations to invest in property in Indonesia?
   •    Jakarta: High rental demand, commercial properties, mixed-use developments.
   •    Bali: Tourism-driven villas, resorts, and rental properties.
   •    Surabaya: Growing middle-class demand, industrial and residential investments.
   •    Medan & Makassar: Emerging cities with increasing commercial and residential projects.
   •    North Bali & Lombok: Upcoming hotspots for tourism and resort developments.

4. What types of properties are good for investment?
   •    Apartments & Condos: Popular in Jakarta and Surabaya due to urbanization.
   •    Landed Houses: Strong demand in suburban areas for family homes.
   •    Commercial Buildings: Offices, retail spaces, and mixed-use developments in major cities.
   •    Tourism Properties: Villas, resorts, and hotels in Bali, Lombok, and other tourism zones.
   •    Industrial & Warehousing: Growing demand due to logistics expansion.

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5. How can foreigners finance property purchases in Indonesia?

Foreigners generally cannot get local mortgages from Indonesian banks unless they have an established PT PMA (foreign company). 

Financing options include:
   •    Developer installment plans (for off-plan properties).
   •    International financing from foreign banks.
   •    Private lending arrangements. 

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6. What taxes and fees should investors be aware of?
   •    VAT (PPN): 11% on new property purchases (if applicable).
   •    Luxury Goods Tax (PPnBM): 20% for high-end properties above certain thresholds.
   •    Property Transfer Tax (BPHTB): 5% paid by the buyer.
   •    Annual Land & Building Tax (PBB): 0.5% of assessed property value.
   •    Income Tax (PPh) on Sales: 2.5% paid by the seller.
   •    Rental Income Tax: 10% for corporate-owned properties; up to 35% for personal ownership.

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7. What are the key legal risks when buying property in Indonesia?
   •    Land Ownership Issues: Ensure title verification through a Notary (PPAT).
   •    Overlapping Claims: Some lands in regional areas where a lot of land are yet to have title deeds sometimes have disputes due to poor record-keeping. 
   •    Building Permits (IMB/PBG): Ensure the property has the correct legal permits.
   •    Zoning Restrictions: Some areas restrict commercial or residential use.

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8. Is Indonesia a good market for rental income investments?

Yes. Rental yields in Jakarta range from 6-9%, while in Bali, short-term rentals through platforms like Airbnb can generate 10-15% annual returns, depending on location and property type. 

Demand for expat-friendly housing, student accommodations, and serviced apartments is also strong.

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9. How do property developers sell properties in Indonesia?
   •    Off-plan (Pre-sales): Many developers sell units before construction, offering discounts and payment plans.
   •    Completed Properties: Can be bought outright or via financing.
   •    Strata Title for Apartments: Buyers own individual units but share common facilities.

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10. How is the future outlook for Indonesia’s property market?
   •    Urban Expansion: Jakarta’s growing population keeps demand high.
   •    New Capital (IKN) Development: Opportunities in Kalimantan due to Indonesia’s new capital city.
   •    Tourism Growth: Bali, Lombok, and emerging destinations like Labuan Bajo offer long-term opportunities.
   •    Industrial Boom: Warehousing and logistics properties are seeing rising demand.

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11. What should investors do before buying property?
   •    Conduct Due Diligence: Work with a trusted Notary (PPAT) and legal expert.
   •    Check Developer Track Record: If buying off-plan, ensure the developer is reputable.
   •    Understand Exit Strategies: Consider future resale value and liquidity.
   •    Factor in Holding Costs: Property taxes, maintenance, and possible currency fluctuations.

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12. How can an investor exit their investment?
   •    Selling to Locals: Freehold properties (Hak Milik) can only be sold to Indonesian citizens.
   •    Selling via PT PMA: If structured under a company, assets can be sold to other businesses or investors.
   •    Short-Term Rentals: Generating rental income before selling at a higher price later.
   •    Selling shares in an IPO: Generating increase in valuation while enabling partial exit as well as raising capital for expansion.

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Final Thoughts

Indonesia’s property market is one of the most dynamic in Southeast Asia, with high potential in urban, tourism, and industrial sectors. 

However, understanding legal frameworks, ownership rules, and tax structures is crucial before investing. 

Partnering with experienced professionals such as Nusa Dev Group and conducting thorough research will help maximize returns and minimize risks.