Property Investment: FOREIGNERS’ OPPORTUNITY

Nov.28, 2008 in Legal Aspect

bali property investment opportunity

Property Investment: FOREIGNERS’ OPPORTUNITY

There are several ways that foreigner could have land in Indonesia.
According to Indonesia’s Act

Act No. 5 / 1960 about land main rule (UUPA). It has written that land in Indonesia only for Indonesian or organization, which have permission by the Indonesia government.

Chapter III, Article 21, UUPA says:
(1) Land in Indonesia only for Indonesian citizen.
(2) Organization which have permissions by Indonesia government and with its condition.

UUPA also gives opportunity to foreigner to have land in Indonesia with authority to use it/explore it.

Chapter VI, article 41 UUPA, says:
(1) Applied Rights is authority to use and, or explore the land which directly powered of attorney by the state or belong to someone, who gives authority and duties to decide by someone who has authority or agreement with the owner which not lease agreement or land explore agreement, or anything aren’t brake the law and life.
(2) Authority to apply the land can be given if:
a. as long as he / she can;
b. Free, with payments or fees;
(3) Applied Rights should not do by any harmful.

Chapter VI, article 42, UUPA says:
Who have authority to apply the land?
a. Indonesian;
b. Foreigner who stays / lives in Indonesia;
c. Organization which was made by law and located in Indonesia;
d. Foreign organization which has branch office in Indonesia.

According to Indonesia Government’s Rule (PP) No. 41 / 1996 about houses whose belong to foreigner who stays in Indonesia.

Article 1, point 1, says:
(1) Foreigner who stays in Indonesia can have a house for staying with some authority rights.

Article 2, says:
Foreign could have a house in Indonesia as written in article 1 are:
(1) A house which built on land:
a. Applied rights on state land.
b. By agreement.
(2) Houses that were built on land with applied rights.

Article 5, says:
(1) An agreement in article 2, point 1 could give approximately 25 years.
(2) The time above could add 25 year again if there is any new agreement or new application.

Practicing Law and Government Rule
Practicing laws above are ruled by Head of National Land.
Foreigner could have a house in Indonesia with some ways:

1. Application of applied rights on state land.
Foreigner should register the application to state in order to use the land as houses. To continue using these applied rights they should pay as compensation to state. By the time of applied right is finish, the land must release / replace to someone. If 1 year not release after the time was ended, the state will sale the land in public sale.

2. Application of applied right on own rights / applied rights of the building.
In this way, they should make an agreement between the owner of the land and foreigner. The agreement should write on PPAT / Notary (someone who has authority to make Land Acts). Continuing the applied rights must write on other agreement between owner and foreigner. If the time is end or foreigner does not live in Indonesia anymore, so the land belongs to the owner again.

3. Application of applied rights on own rights with release way.
In this way, Indonesian or the owner releases the land and foreigner make application to use the land. Continuing using the land should register to state with payment as compensation. This applied right could be released or buy-sale by the user to Indonesian or foreigner and then the buyer make the application. If the time is end or foreigner does not live in Indonesia anymore the land will belong to state or someone who makes application to use the land.

There are two choices in the practice.
Practically, foreigner could have private land in Indonesia with these ways:

a. Foreigner who bought land in Indonesia with Indonesian citizen name written on the land act.
Here are systematically to make land act by foreigner:
- Purchase acts must be signed by Indonesian who has been trusted by foreigner, so certificate will issue as Indonesian.
- In addition, they should sign a Statement Agreement, which amount of money written on it. The money that was used in buying land belongs to foreigner and Indonesian only representative. Also, it should be ruled or written that Indonesian could not do harm to foreigner who was bought land in Indonesia; and Indonesian and his / her relatives must help foreigner when she / he intend to sell or lease the land.

b. Using Loan Agreement.
Here are systematically in making Land Acts:
- Purchase acts should be signed by Indonesian who has been trusted by foreigner;
- Then, Indonesian should sign The Loan Agreement, which Indonesian owes some money to foreigner as much as land price with land as guarantee.
- Together, they also should sign Statement Letter, which amount of money written on it. The money that was used in purchasing the land that was borrowed from foreigner.
- Next, both of Purchase Acts and Loan Agreement should register to Land Dept. Office so then Owner’s Certificate will issue as Indonesian where loan guarantee to foreigner written on it, also Credits Guarantee Certificate as foreigner will issue too.