What If a Foreigner Wants to Buy Your Surabaya Property?

Opini / Friday, January 29th, 2016

Surabaya is a beautiful and bustling port city on the island of Java. Because of this, it attracts people from all over the world who want to live and work here. If you are looking to sell your home in Surabaya, chances are you may encounter a non-Indonesian to buy it. If that is the case, there are some special considerations that need to be known to you as the seller and to the potential buyer of you home. Here is what you need to know about foreign ownership and how it could impact the sale of your home in Surabaya.

The Fundamentals

If a foreigner wants buy land in Indonesia they must first navigate some intricate land laws. Indonesian land law is, in fact, distinctly unlike laws in most other developed countries. Any foreigner interested in buying land in Indonesia must first understand the law and understand that the laws from whatever country they may be coming from do not apply. For starters, there are several different types of titles recognized in Indonesia. Those are outlined here for your understanding as a seller as well as the understanding of any foreigner that may be interesting in buying your home.

Freehold Title or Hak Milik

This is a type of title can only be held by an Indonesian citizen. A foreigner will not be able to have ownership of a direct freehold or land in Indonesia.

Building Rights Title or Hak Guna Bangunan

These types of titles gives the holder the right to build and own buildings on land that somebody else owns. This title can only be granted for 30 years but can be extended for another 20 years. These titles are granted to citizens or authorized entities and can be used as collateral or reassigned to a third party.

Right to Use Title or Hak Pakai

This is basically a freehold title for foreigners. This enables a foreigner to buy use of a Hak Milik land, but it is registered in a separate certificate in the name of the foreigner. This type of title is not the same as a leasehold title, or Hak Sewa. These titles are denote a registered interest in the land. A foreigner may only hold one of these titles in Indonesia at a time.

These titles are granted for a term of 25 years initially but can be extended for up to a total of 100 years. These are also transferrable titles.

Leasehold or Hak Sewa

Leasehold titles are granted to both tenants of residential properties as well as commercial ones. The lease is in the name of the foreigner and are generally for periods of time between 30 and 50 years, agreed to in advance of the lease signing.

How Can a Foreigner Legally Buy Property?

Now that all the different titles are out of the way you can begin to understand how a foreigner can legally purchase a home in Surabaya, because it is possible for foreigners to do this and enjoy the full rights of owning property. There are two basic ways for this to happen:

  • Nominee Arrangement where the an Indonesian citizen is nominated to buy land on the foreigners behalf
  • Form a foreign investment company to purchase the title

Nominee Arrangement

This is probably one of the most common ways in which a foreigner will buy a home or land in Indonesia. The ownership of the land is transferred from the previous owner to the nominee. For the security of the buyer there must be several agreements made with the nominee.

The first is a loan agreement where that indicates that the buyer lent the money to the nominee to buy the property. The second is the Irrevocable power of attorney which gives the buyer full authority to sell, lease or mortgage the land. The final agreement is called permanent right of use agreement that states that the buyer has full rights to own and live on the land.

What this Means for the Seller

When you are in the market to sell your home it is best to have professional help in order to navigate the details of someone purchasing your property. This protects your rights as the seller as well as the rights of the person purchasing the home.

What you should try to concentrate on as the seller is to familiarize yourself with the process in order to make sure you are aware of what is going on at any given point in the sale. Knowledge is definitely power and this is one transaction where you want as much power as you able to get.

It’s possible that you may never encounter a foreigner wishing to buy your property, but it’s better to be prepared and know the land laws in your country before you start!

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