Indonesia Expat
Business/Property Info for Expats Observations

Property: Nightmare or Sound Investment?

Will Rogers (the actor, writer and real-life cowboy) said it best: “Don’t wait to buy land. Buy land and wait.” It was true for him at the turn of the 20th century and it’s certainly true today, even in Indonesia.

I can see some readers nodding as they sip their coffee, knowing that Mr. Rogers makes sense because they recognize property is the safest investment out there, but there’s a voice in the back of the kitchen and it wants to be heard. “Not in Indonesia, buddy. Expats can’t ‘own’ land here.”

Mr. Sceptical McSmirky is right, of course. Expats can’t own land like an Indonesian can, or maybe not like you can at home. No amount of complaining about how bad the system is will change the Indonesian constitution. Trust me on that one. But McSmirky is overlooking the fact that you can own as an expat so long as you follow procedures.

There are specific foreign ownership rules and regulations which were updated in December 2015 that do make it easier for foreigners to own land and property under Hak Pakai (Right to Use) and Hak Sewa (Leasehold) for residential properties and Hak Guna Bangunan (Right to Build) for commercial titles. If someone tells you different or suggests you use a nominee to get a Freehold or Hak Milik title, don’t turn and walk away, run as fast as you can! Unfortunately, the nominee loophole has been going on in some places for many years now and I dare say it still is, but take note: it’s wrong and is best avoided.

Imagine how you’d feel if you were led to believe you actually had a freehold title and it turns out you don’t because the so called nominee agreement was proof of the intention to defraud the government out of land taxes. Initially there’s shock and disbelief, and McSmirky is right there fuelling the fire of regret. “Told you so!” There’s a legal battle, which you’re never going to win because the foundation of your case is built on an illegality. You didn’t follow the rules. You end up losing everything; the land, the house, the lot. It’s not a pretty picture but it does happen. Don’t let it happen to you.

Some people are uncomfortable with either Hak Pakai or Hak Sewa and so should consider creating a foreign owned company called a PMA. (The process for this has also been streamlined.) The PMA can legally have a Right to Build (HGB) certificate. You own the company and the company owns the property. Simple. Straight forward. And most importantly, legal!

A simple understanding of these regulations helps enormously in your house-buying journey. Why? Because your search becomes more focused, allowing you to concentrate on the most important question: what do you want and why?

Seems totally obvious I know, but you’d be surprised at how many people don’t really know what they want. Know if you’re buying for lifestyle or investment. Know why. Know the pitfalls. Know how much land you’ll need. Know a realistic price range. Know you’re going to need a real estate agent and be prepared to listen. You’ll need to talk to people.

Some advice: create a folder to save images, colours, textures and ideas and start an ‘Inspiration Board’. Fill it with things that inspire you. The more you think about each aspect of what you want the more you’ll be able to focus and this will allow you to share this knowledge and get to know the people who can help you find it better.

There’s always an inherent danger associated with online research and too much information can be as bad as none at all, so be focused and mindful. Use social media more. LinkedIn is so much more than a way to find a job, it’s a great resource for specialists in the property business. You’ll find them commenting about market trends and initiatives, sharing insights as to how they run their business and what’s important to them. Find positive people. Remember a property purchase is intrinsically emotional and tapping into this energy can have very constructive and long-term effects, which go beyond the purchase.

The good news is the good companies are in tune with this and call it the Customer Experience (CX). Basically they’re trying to improve how you feel about them rather than sell you something. Sure, they make their money on commissions, so a sale is important but the priority is the experience. The logic is that you’re more likely to make a purchase if you feel good about the company and the people you’re dealing with.

At least that’s the theory.

An easy way to test the water is to send that all-important first enquiry email to as many agents as tickles your fancy. How quickly do you get a response? Is it generic and automated? How do you feel? A speedy and personalized response says a lot about the people on the other side of the keyboard. It’s simple; if an agent can’t be bothered to reply to your email enquiry correctly they’re not bothered about you as a person. 

That first touch point is so important. It needs to reassure, to empathize and to fill you with confidence. Remember you’re a buyer. You want to buy, of course you do, but you also need to connect. When it happens you’ll know you’ve found your guardian agent.

Your guardian agent should listen and reassure. She doesn’t try to bamboozle you with how the IMB and licensing are still in process. She doesn’t try to tie you into a ‘nominee structure’. She tells you about the tax and the maintenance fees. She’s honest, and knowledgeable about the government’s latest initiatives to make the whole home-owning process for expats easier. She applauds the latest, now eleventh economic stimulus package. She half-expects things to change and flip and flop but she’s positive about the direction things are heading. Her enthusiasm is infectious and you feel comfortable with her guidance. She seems as genuinely and honestly interested as you are in your investment and what your dreams are.

She’ll also suggest you take third party legal advice. Take it. She’ll give you choices and you should opt for the one you feel most comfortable with. There should be no pressure to go with one person or the other.

So, yes it’s OK for foreigners to buy land in Indonesia. Take Will Rogers’s advice and invest in property, but remember to follow the rules when you do. It will make your life easier.

To avoid any unnecessary heartache and financial meltdown remember these five key facets to buying property:

  1. Understand why you’re buying and research all aspects (legal as well as property)
  2. Follow the rules and regulations you learn from research
  3. Find an agent that listens – your Guardian Agent
  4. Take third party legal advice
  5. Don’t take shortcuts (see rule #2)

Good luck and enjoy the journey!


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