Frequently asked questions on Indonesian property investment

Investing in Indonesian property as a foreigner raises legitimate structural questions. Below are the ones we hear most often, answered plainly.

Company structure

Can foreigners be the sole shareholders of an Indonesian LLC?
No, but foreigners can own up to 100% of a PT PMA, which requires a minimum of two shareholders. Both shareholders can be foreign — two foreign individuals, a foreign individual and a foreign company, or a foreign parent and subsidiary. There is no requirement for an Indonesian partner in most sectors.

What does the IDR 10 billion minimum investment value mean?
It is the total investment commitment, not just cash. It includes cash capital, land value, building and construction costs, equipment, and working capital. Property value typically forms the largest portion. You do not need IDR 10 billion in the bank.

What is the difference between a PT and a PT PMA?
A PT is a local company with Indonesian shareholders only. A PT PMA allows foreign shareholders (up to 100%). The PT PMA carries a higher minimum investment (IDR 10 billion vs. IDR 50 million), is limited to HGB land rights (no Hak Milik), and requires additional regulatory reporting through BKPM.

Land ownership

Can foreigners own land in Indonesia?
Not outright. Foreigners cannot hold Hak Milik (freehold). The practical options are: PT PMA with HGB (registered land right, up to 80 years), Hak Pakai for individuals with KITAS (registered right, up to 70 years), and leasehold/Hak Sewa (contractual right, per contract terms). When agents say "freehold," they typically mean HGB via PT PMA — not true perpetual ownership. Nominee arrangements are illegal.

What is HGB and why is it called "freehold" for foreigners?
HGB (Hak Guna Bangunan) is a registered land right lasting up to 80 years. It is called "freehold" because the holder owns property outright through their company, but it is technically time-limited. True freehold (Hak Milik) is perpetual. HGB requires renewal every 30–50 years with government approval. For most investors, 80 years exceeds their investment horizon, and renewals are typically granted for compliant, productive properties.

Who decides HGB renewal?
The government — specifically BPN (National Land Agency) at the local land office. The landowner applies, but BPN has discretion to approve or deny. Start the process one to two years before expiry.

What are the conditions for renewal?
BPN evaluates productive use (is the land used according to its designation?), permit compliance (valid IMB/PBG), tax compliance (PBB paid for all years), company status (active PT PMA, LKPM compliant), and public interest (does the government need the land?). Denials are rare for compliant properties but occur for unused land, compliance violations, or government infrastructure projects.

Can I use an Indonesian nominee to hold Hak Milik for me?
This is illegal, risky, and strongly discouraged. Nominee agreements violate Indonesian law. They are void and unenforceable — you have no legal standing. Indonesian courts consistently rule against foreigners claiming beneficial ownership. Use PT PMA with HGB, Hak Pakai with KITAS, or a legal leasehold instead.

Transactions and process

What happens to Hak Milik land when sold to a PT PMA?
It must be converted to HGB during the transfer. BPN handles the conversion as part of the process — you do not separately apply. The new HGB certificate will show your PT PMA as the right holder.

What due diligence should I do before buying?
Verify the land certificate's authenticity at BPN and confirm it matches boundaries. Confirm the seller is the registered owner with authority to sell. Check for encumbrances — mortgages, liens, disputes. Verify PBB (property tax) is current with no arrears. Confirm IMB/PBG building permits are valid. Ensure the intended use matches the zoning designation.

What taxes apply to property transactions?
The buyer pays BPHTB (transfer tax) at 5% of transaction value. The seller pays PPh Final at 2.5% of transaction value. Ongoing, the owner pays PBB (annual property tax) at approximately 0.1–0.3% of NJOP (tax-assessed value).

How long does it take to set up a PT PMA?
Basic establishment takes 2–4 weeks. Full operational readiness — with all licences, bank accounts, and permits — typically requires 1–3 months.

What is the difference between PPJB and AJB?
PPJB (Perjanjian Pengikatan Jual Beli) is a preliminary binding agreement — a commitment to transact. AJB (Akta Jual Beli) is the final sale deed that actually transfers ownership. Both are standard steps in an Indonesian property purchase.

Can I get bank financing for property held under HGB?
Yes. Indonesian banks accept HGB as collateral through Hak Tanggungan (mortgage right). Leasehold (Hak Sewa) cannot be used as collateral.

Should I buy through a new PT PMA or acquire an existing one?
Both options have merits. A new PT PMA gives full control and a clean history. Acquiring an existing company may be faster and carry tax advantages, but requires thorough due diligence for hidden liabilities.

Long-term HGB questions

What happens after 80 years of HGB?
After 80 years, HGB expires. The holder can apply for a new HGB grant (treated as a new application), convert to Hak Pakai (different right, different rules), or the land reverts to state control. In practice, most properties do not reach 80 years — they are sold, companies restructured, or properties redeveloped. For investment horizons under 50 years, this is rarely a practical concern.

If HGB extension is denied, will the state compensate for buildings?
Compensation is possible but not guaranteed. When the government needs land for infrastructure, compensation is required by law. For zoning changes, it is often negotiated. For owner compliance failures or failure to apply for renewal, compensation likelihood drops significantly. Building value (minus depreciation) and improvements are usually compensated; land value is not — you never owned the land itself. The best protection: maintain compliance and apply for renewal on time.

These FAQs provide general information about Indonesian property law and foreign investment. They do not constitute legal advice. Indonesian regulations change frequently. Always consult qualified Indonesian legal, tax, and investment professionals before making decisions.