Investment Types in Indonesia

As an investor captivated by the allure of Indonesia, you may be considering expanding your property portfolio in this enchanting archipelago. It's essential to familiarise yourself with the nuances of freehold and leasehold property laws in the country.


Leasehold VS Freehold / HGB

In Indonesia, when it comes to buying property, two prominent types of ownership exist: leasehold and freehold.

Leasehold grants an individual the right to use and occupy a property for a specified duration, usually ranging from 25 to 30 years, with the possibility of renewal. This method is particularly popular among foreigners as it's the most straightforward way for them to access property in the archipelago.

On the other hand, freehold offers complete, indefinite ownership rights to the land and any structures built on it. This means there's no expiration on the ownership, and it can even be passed down through generations. However, it's crucial to note that only Indonesian citizens can obtain freehold titles, making it off-limits for foreign buyers.

On this table below you will find the important comparison between Leasehold and Freehold (For Indonesians) or HGB (For International Investor)


Investing in a Leasehold

anyone can lease a property in Bali under the Hak Pakai (right of use)

Buying Freehold (Hak Milik for Indonesians ONLY) or HGB (Right of Use)

  • Only available for Indonesian Nationals or if you have a PT PMA with a 10 billion IDR capital guidance
  • or minimum land size 20 ares and 5 billion IDR for a villa(Bali)
  • or minimum 2 billion IDR for an apartment on a commercial land(Bali)


Investing in a Leasehold

  • Available for everyone, leasehold contract under your own name
  • Any duration available up to 80 years (Usually 25 years)

Buying Freehold (Hak Milik for Indonesians ONLY) or HGB (Right of Use)

80 years


Investing in a Leasehold

Extension rights are yours per contract, price and conditions usually negotiated during the lease, or at the end of the first lease

Buying Freehold (Hak Milik for Indonesians ONLY) or HGB (Right of Use)

A new HGB certificate can be acquired.

Set Up

Investing in a Leasehold

  • All you need is a Passport copy and a POA if you want to sign from overseas
  • The lease will be notarised and registered with the Land registry
  • Due Diligence takes 2 weeks

Buying Freehold (Hak Milik for Indonesians ONLY) or HGB (Right of Use)

  • Company set up approx 2,000 USD
  • 100% foreign ownership w 2 directors


Investing in a Leasehold

  • Lease Tax 10% for the seller to be paid at lease signature
  • Notary fee 1-1.5%

Buying Freehold (Hak Milik for Indonesians ONLY) or HGB (Right of Use)

Buyer's tax 5%, seller tax 2.5%


Investing in a Leasehold

  • Deposit payment to book the unit
  • Land lease agreement
  • Building agreement when buying off the plan

Buying Freehold (Hak Milik for Indonesians ONLY) or HGB (Right of Use)

  • Deposit payment
  • Land transfer agreement
  • Building agreement


Investing in a Leasehold

Not provided

Buying Freehold (Hak Milik for Indonesians ONLY) or HGB (Right of Use)


Taxes thereafter

Investing in a Leasehold

Taxes on rental income are 20% for a foreigner, 10% for a resident/working in Indonesia, all is declarative through your management company

Buying Freehold (Hak Milik for Indonesians ONLY) or HGB (Right of Use)

  • Corporation tax 0.5% up to 4 billion IDR turnover
  • Company tax return and personal tax returns
  • Tax efficient


Investing in a Leasehold

Sale of the lease, at any point, 10% tax on the value agreed by both parties

Buying Freehold (Hak Milik for Indonesians ONLY) or HGB (Right of Use)

  • Sale of the company
  • Land transfer tax 2.5% for the seller

Hak Guna Bangunan VS Hak Pakai


Hak Guna Bangunan

The right to build

Hak Pakai

The right to use property

Certificate Validity

Hak Guna Bangunan

Initial valid 30 years + 20 extension + 30 renewal thus the total ownership is 80 years

Hak Pakai

Initial valid 25 years + 25 extension thus the total ownership is 50 years


For leasehold properties, what happens when my lease expires?

If your property certificate expires, it's possible to acquire a new one. This is especially relevant if you're thinking long-term—beyond 80 years from your initial lease. certificates.

Is it possible for leasehold properties to become freehold?

No, a property's designation as freehold or leasehold is determined by the landowner. In Bali, for instance, landowners tend to retain freehold rights, given that historically, leasehold has been the primary option available for foreign investors.

Can I sell my leasehold property?

Yes, you can sell your leasehold property at any time. The lease will then be transferred to the new leaseholder.

Can I rent out my property while I'm not in the country?

Properties under the 'Hak Pakai' certificate are primarily intended for personal use, which means an individual can only hold one property with this title. However, leasehold properties often permit sub-leasing ('Hak Sewa' - right to rent) allowing owners to rent out their properties, even if they are abroad. It's essential to be aware that while operating a property with a Hak Pakai certificate for business purposes, there are specific constraints to consider.

Can foreigners purchase freehold land or property in Indonesia?

Foreign nationals cannot directly own freehold property in Indonesia. However, the most secure method for foreigners to invest in Bali property is via a foreign-owned company, known as PT PMA (Penanaman Modal Asing). Through a PT PMA, foreigners can acquire the 'Right to Build' (Hak Guna Bangunan, or HGB) and 'Right to Use' (Hak Pakai, or HP) certificates.

What are the rights associated with the 'Right to Build' and 'Right to Use' certificates?

Both certificates effectively grant you ownership rights over the property. These rights can be passed down to family members as inheritance or transferred through sale. If sold to an Indonesian citizen, they can convert the certificate to Hak Milik, which is the right to own.

How can I ensure the legality of my property transactions in Indonesia?

Engage with reputable lawyers and property agents familiar with Indonesian property laws, particularly those relating to foreign ownership. They can guide you through the process and ensure that all transactions are above board.
Remember to consult local experts or legal counsel when considering property investments in Indonesia. At GPFG, we have full-time property, investment and legal experts who can walk you through every step of the process.