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A Brief Guide for Overseas Property Buyers

Freehold title on land (hak milik) in Indonesia is a right extended only to Indonesian citizens.

For foreigners contemplating the purchase of freehold title, the only option is to use an Indonesian nominee. With proper legal advice, foreigners can secure their interests with a series of documents and by taking a mortgage on the land, which has the effect of placing their name on the title. This precludes any dealing in the title without the foreigners' consent to remove the mortgage.

If married to an Indonesian woman, a foreigner should take care about appointing her as the nominee in land purchases. Under Indonesian law, unless the woman has a prenuptial agreement with her husband, all land in her name acquired during the marriage is subject to forfeiture to the government.

LEASES: For a foreigner uncomfortable with the nominee arrangement, land may be leased. The maximum period of a notarized lease is 25 years, though it's the practice in Bali to have two leases of 25 years each, executed on consecutive days with a 25-year option on the second lease, effectively yielding a 75-year lease.

CORPORATE OWNERSHIP: The legally permissible way for a foreigner to invest in Indonesia is to establish a PMA company. The process is straightforward, and provides for the shares in the limited liability company to be held either in the foreigner's name or that of an offshore investment company, if appropriate.

The PMA company can acquire land by purchase this allows for purchase of the land with and HGB (hak guna bangunan) title. This title is valid for 30 years, extended for 20 years and renewable for a further 30 years. A foreigner also has the option of simply leasing the land to the PMA or purchasing through a nominee and leasing to a PMA company.

With any property purchase in Indonesia, it is important that the prospective purchaser conduct a proper due diligence on the land, ensuring that the owner has title, that the title is genuine and incontestable, and that the land can be used fot the purpose intended. Each locale will also have regulations requiring local advice.

Source: Tropical Homes Magazine Apr-Jun 2008

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