Ada Pertanyaan? Hubungi Kami 
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Ada Pertanyaan? Hubungi Kami Marcell Sihombing, Fitri N. Heriani
Foreign citizen in Indonesia. Photo by: RES
Foreign citizens living in Indonesia may now breathe a sigh of relief following the issuance of Government Regulation No. 103 of 2015 on The Ownership of Property by Foreign Nationals Domiciled in Indonesia (2015 Regulation). Under the 2015 Regulation, the government is offering legal certainty for foreign citizens in possession of valid residence permits as regards the acquisition of property in Indonesia. However, a number of limitations still have to be observed with regards to this new regulation.
The 2015 Regulation states that foreign nationals who live or invest in Indonesia, or who are generally of benefit to the Indonesian economy, may now acquire property in Indonesia under the right-to-use classification of land title. The 2015 Regulation also makes it clear that in the event of a property owning foreigner’s death, right-to-use titles can be bequeathed to their heir(s).
Commenting on this issue, Zulfi Syarif Koto, executive board member of The Housing Urban Development Institute (HUD Institute), asserted that his institution had initially recommended that the government revise Government Regulation No. 41 of 1996, under which such matters were regulated, instead of establishing a whole new regulatory framework. However, the government ultimately decided to issue a new regulation instead, which Mr. Koto has decided to support, albeit with a number of reservations.
Firstly, Mr. Koto points to the need to clearly define that the right to use only applies to buildings and not to freehold titles. Secondly, according to Mr. Koto, the government must map out strictly delineated geographical zones in which the new regulation will apply, as he believes that property ownership by foreign citizens must not be allowed in all locations and regions across the country. And finally, there must be clear definition as regards the types and sizes of property that can be owned by foreign citizens.
Moreover, Mr. Koto is also urging the government to involve regional administrations in the implementation of the 2015 Regulation, as many foreign citizens aspire to owning properties across the length and breadth of the country's various regions.
Ali Tranghanda, a property expert, is of a different opinion altogether from Mr. Koto however. According to Tranghanda, various issues may arise during the actual implementation of the 2015 Regulation, including possible disputes between spouses of different nationalities. The 2015 Regulation stipulates that any property owned by mixed marriage couples does not constitute joint matrimonial property that must be proven through a notarized pre-nuptial agreement.
“In the event of a divorce, the land title and right to use automatically falls into the possession of the Indonesian national spouse if a pre-marital agreement was not drawn up beforehand. As a result, disputes may arise,” asserted Mr. Tranghanda.
Another issue concerns property financing. Mr. Tranghanda believes that it would be difficult for a bank to finance the construction of property if it is ultimately to be owned by a foreign citizen. Tranghanda asserts that such projects are not bankable, as banks commonly try to avoid any possible risks that may result from the construction of foreign-owned property.
Finally, Mr. Tranghanda also asserts that the 2015 Regulation may well lead to a rapid increase in property prices, and even to a property bubble. With this in mind, Mr. Tranghanda suggests that if the government is intending to specifically regulate the matter of property ownership by foreign nationals, then both a strict regulation of prices, as well as an oversight mechanism, will be vital. Indonesia, according to Mr. Tranghanda, is not yet ready to allow foreign citizens to have unrestricted access to property ownership in this country.
“The government should focus its energies on attracting foreign investment into Indonesia while trying to improve matters for Indonesian citizens regarding property ownership. This issue [property ownership by foreigners] will only lead to various troubles and squabbles over land and property,” concluded Mr. Tranghanda.
For more information on the 2015 Regulation, see Indonesia Legal Brief (ILB) No. 2797
The 2015 Regulation states that foreign nationals who live or invest in Indonesia, or who are generally of benefit to the Indonesian economy, may now acquire property in Indonesia under the right-to-use classification of land title. The 2015 Regulation also makes it clear that in the event of a property owning foreigner’s death, right-to-use titles can be bequeathed to their heir(s).
Commenting on this issue, Zulfi Syarif Koto, executive board member of The Housing Urban Development Institute (HUD Institute), asserted that his institution had initially recommended that the government revise Government Regulation No. 41 of 1996, under which such matters were regulated, instead of establishing a whole new regulatory framework. However, the government ultimately decided to issue a new regulation instead, which Mr. Koto has decided to support, albeit with a number of reservations.
Firstly, Mr. Koto points to the need to clearly define that the right to use only applies to buildings and not to freehold titles. Secondly, according to Mr. Koto, the government must map out strictly delineated geographical zones in which the new regulation will apply, as he believes that property ownership by foreign citizens must not be allowed in all locations and regions across the country. And finally, there must be clear definition as regards the types and sizes of property that can be owned by foreign citizens.
Moreover, Mr. Koto is also urging the government to involve regional administrations in the implementation of the 2015 Regulation, as many foreign citizens aspire to owning properties across the length and breadth of the country's various regions.
Ali Tranghanda, a property expert, is of a different opinion altogether from Mr. Koto however. According to Tranghanda, various issues may arise during the actual implementation of the 2015 Regulation, including possible disputes between spouses of different nationalities. The 2015 Regulation stipulates that any property owned by mixed marriage couples does not constitute joint matrimonial property that must be proven through a notarized pre-nuptial agreement.
“In the event of a divorce, the land title and right to use automatically falls into the possession of the Indonesian national spouse if a pre-marital agreement was not drawn up beforehand. As a result, disputes may arise,” asserted Mr. Tranghanda.
Another issue concerns property financing. Mr. Tranghanda believes that it would be difficult for a bank to finance the construction of property if it is ultimately to be owned by a foreign citizen. Tranghanda asserts that such projects are not bankable, as banks commonly try to avoid any possible risks that may result from the construction of foreign-owned property.
Finally, Mr. Tranghanda also asserts that the 2015 Regulation may well lead to a rapid increase in property prices, and even to a property bubble. With this in mind, Mr. Tranghanda suggests that if the government is intending to specifically regulate the matter of property ownership by foreign nationals, then both a strict regulation of prices, as well as an oversight mechanism, will be vital. Indonesia, according to Mr. Tranghanda, is not yet ready to allow foreign citizens to have unrestricted access to property ownership in this country.
“The government should focus its energies on attracting foreign investment into Indonesia while trying to improve matters for Indonesian citizens regarding property ownership. This issue [property ownership by foreigners] will only lead to various troubles and squabbles over land and property,” concluded Mr. Tranghanda.
For more information on the 2015 Regulation, see Indonesia Legal Brief (ILB) No. 2797
(rfs/sp)
Marcell Sihombing, Fitri N. Heriani
Foreign citizen in Indonesia. Photo by: RES
Foreign citizens living in Indonesia may now breathe a sigh of relief following the issuance of Government Regulation No. 103 of 2015 on The Ownership of Property by Foreign Nationals Domiciled in Indonesia (2015 Regulation). Under the 2015 Regulation, the government is offering legal certainty for foreign citizens in possession of valid residence permits as regards the acquisition of property in Indonesia. However, a number of limitations still have to be observed with regards to this new regulation.
The 2015 Regulation states that foreign nationals who live or invest in Indonesia, or who are generally of benefit to the Indonesian economy, may now acquire property in Indonesia under the right-to-use classification of land title. The 2015 Regulation also makes it clear that in the event of a property owning foreigner’s death, right-to-use titles can be bequeathed to their heir(s).
Commenting on this issue, Zulfi Syarif Koto, executive board member of The Housing Urban Development Institute (HUD Institute), asserted that his institution had initially recommended that the government revise Government Regulation No. 41 of 1996, under which such matters were regulated, instead of establishing a whole new regulatory framework. However, the government ultimately decided to issue a new regulation instead, which Mr. Koto has decided to support, albeit with a number of reservations.
Firstly, Mr. Koto points to the need to clearly define that the right to use only applies to buildings and not to freehold titles. Secondly, according to Mr. Koto, the government must map out strictly delineated geographical zones in which the new regulation will apply, as he believes that property ownership by foreign citizens must not be allowed in all locations and regions across the country. And finally, there must be clear definition as regards the types and sizes of property that can be owned by foreign citizens.
Moreover, Mr. Koto is also urging the government to involve regional administrations in the implementation of the 2015 Regulation, as many foreign citizens aspire to owning properties across the length and breadth of the country's various regions.
Ali Tranghanda, a property expert, is of a different opinion altogether from Mr. Koto however. According to Tranghanda, various issues may arise during the actual implementation of the 2015 Regulation, including possible disputes between spouses of different nationalities. The 2015 Regulation stipulates that any property owned by mixed marriage couples does not constitute joint matrimonial property that must be proven through a notarized pre-nuptial agreement.
“In the event of a divorce, the land title and right to use automatically falls into the possession of the Indonesian national spouse if a pre-marital agreement was not drawn up beforehand. As a result, disputes may arise,” asserted Mr. Tranghanda.
Another issue concerns property financing. Mr. Tranghanda believes that it would be difficult for a bank to finance the construction of property if it is ultimately to be owned by a foreign citizen. Tranghanda asserts that such projects are not bankable, as banks commonly try to avoid any possible risks that may result from the construction of foreign-owned property.
Finally, Mr. Tranghanda also asserts that the 2015 Regulation may well lead to a rapid increase in property prices, and even to a property bubble. With this in mind, Mr. Tranghanda suggests that if the government is intending to specifically regulate the matter of property ownership by foreign nationals, then both a strict regulation of prices, as well as an oversight mechanism, will be vital. Indonesia, according to Mr. Tranghanda, is not yet ready to allow foreign citizens to have unrestricted access to property ownership in this country.
“The government should focus its energies on attracting foreign investment into Indonesia while trying to improve matters for Indonesian citizens regarding property ownership. This issue [property ownership by foreigners] will only lead to various troubles and squabbles over land and property,” concluded Mr. Tranghanda.
For more information on the 2015 Regulation, see Indonesia Legal Brief (ILB) No. 2797
The 2015 Regulation states that foreign nationals who live or invest in Indonesia, or who are generally of benefit to the Indonesian economy, may now acquire property in Indonesia under the right-to-use classification of land title. The 2015 Regulation also makes it clear that in the event of a property owning foreigner’s death, right-to-use titles can be bequeathed to their heir(s).
Commenting on this issue, Zulfi Syarif Koto, executive board member of The Housing Urban Development Institute (HUD Institute), asserted that his institution had initially recommended that the government revise Government Regulation No. 41 of 1996, under which such matters were regulated, instead of establishing a whole new regulatory framework. However, the government ultimately decided to issue a new regulation instead, which Mr. Koto has decided to support, albeit with a number of reservations.
Firstly, Mr. Koto points to the need to clearly define that the right to use only applies to buildings and not to freehold titles. Secondly, according to Mr. Koto, the government must map out strictly delineated geographical zones in which the new regulation will apply, as he believes that property ownership by foreign citizens must not be allowed in all locations and regions across the country. And finally, there must be clear definition as regards the types and sizes of property that can be owned by foreign citizens.
Moreover, Mr. Koto is also urging the government to involve regional administrations in the implementation of the 2015 Regulation, as many foreign citizens aspire to owning properties across the length and breadth of the country's various regions.
Ali Tranghanda, a property expert, is of a different opinion altogether from Mr. Koto however. According to Tranghanda, various issues may arise during the actual implementation of the 2015 Regulation, including possible disputes between spouses of different nationalities. The 2015 Regulation stipulates that any property owned by mixed marriage couples does not constitute joint matrimonial property that must be proven through a notarized pre-nuptial agreement.
“In the event of a divorce, the land title and right to use automatically falls into the possession of the Indonesian national spouse if a pre-marital agreement was not drawn up beforehand. As a result, disputes may arise,” asserted Mr. Tranghanda.
Another issue concerns property financing. Mr. Tranghanda believes that it would be difficult for a bank to finance the construction of property if it is ultimately to be owned by a foreign citizen. Tranghanda asserts that such projects are not bankable, as banks commonly try to avoid any possible risks that may result from the construction of foreign-owned property.
Finally, Mr. Tranghanda also asserts that the 2015 Regulation may well lead to a rapid increase in property prices, and even to a property bubble. With this in mind, Mr. Tranghanda suggests that if the government is intending to specifically regulate the matter of property ownership by foreign nationals, then both a strict regulation of prices, as well as an oversight mechanism, will be vital. Indonesia, according to Mr. Tranghanda, is not yet ready to allow foreign citizens to have unrestricted access to property ownership in this country.
“The government should focus its energies on attracting foreign investment into Indonesia while trying to improve matters for Indonesian citizens regarding property ownership. This issue [property ownership by foreigners] will only lead to various troubles and squabbles over land and property,” concluded Mr. Tranghanda.
For more information on the 2015 Regulation, see Indonesia Legal Brief (ILB) No. 2797
(rfs/sp)