Buy Real Estate in Indonesia as Foreigner

Buy Real estate in Indonesia as Foreigner

Bali is a popular destination among foreigners to invest in real estate

8 Steps for foreigners to buy property in Indonesia

Buying or leasing property in Indonesia can be complicated, especially for foreigners unfamiliar with local regulations and customs. A few key steps can simplify the process and make informed decisions about your property investment.

Step 1: Establish a PT PMA

Establishing a PT PMA allows foreigners to buy or lease property in Indonesia. The process involves meeting the requirements of the Indonesia Investment Coordinating Board (BKPM), which can be time-consuming and complex. Many use a local agency to set up a PT PMA to simplify the process.

Step 2: Use a professional and reliable real estate agent

Working with a skilled real estate agent can help you save time and energy and gain access to a broader range of property listings. They can also help negotiate the purchase or sale of the property and ensure that your interests are protected.

Step 3: Search for a property

Finding the right property to buy or lease involves considering factors such as location, size, materials and style. Depending on your budget and preferences, you can find properties in the city center, near the business district, or in quieter residential areas.

Step 4: Check the property licenses

Before negotiating the price or proceeding with the purchase, it is essential to ask the seller for two crucial documents: the Certificate of the Property and the Building Approval (PBG). If the seller cannot provide these documents, it could indicate that something is wrong.

Step 5: Conduct due diligence

Conducting due diligence is crucial to avoid legal problems and ensure your investment is worthwhile. This involves verifying land ownership, validating licenses, and reviewing the contract.

Step 6: Sign the Sales Purchase Agreement and make a downpayment

The Sales Purchase Agreement (SPA) is a legal document that outlines the obligations of both the buyer and seller in a property transaction. It must be signed in the presence of a public notary authorized for the area (PPAT). Signing the SPA also requires an upfront payment, typically between 10-30% of the total purchase price. It is crucial to ensure that the SPA safeguards your interests and that you fully comprehend all of the terms.

Step 7: Finalize the transaction

The final stage of the property purchase process involves the transfer of ownership from the seller to the buyer, done in the presence of a public notary. Before the transfer, the buyer must pay the Transfer Tax (BPHTB). The notary won’t sign the agreement if the BPHTB isn’t paid, so make sure to be on time.

While some sellers may suggest an unofficial price to minimize taxes, it is essential to note that each property has an NJOP (Nilai Jual Objek Pajak). The NJOP is the average price obtained during the real estate transaction that determines the amount of property taxes that must be paid. For further information on property taxes, please refer to our tax guide.

Step 8: Ownership transfer

The public notary will transfer ownership to the buyer upon completion of the payment and tax obligations. This transfer will be registered at the National Land Agency (BPN), and the buyer will receive a Certificate of the Property that contains all the pertinent details related to the property. With the transfer of ownership complete, the buyer is now the legal owner of the property.